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Is Your Mortgage Loan Broker Properly Licensed and Complying With The Law?

You have a right to know! When you turn over your personal financial information to a loan officer, make sure you know who you are giving your information to. There are new laws regulating Mortgage Loan Brokers.

The new law, 12 CFR Part 226 (Reg Z Docket No. R-1366) (eff. April 1, 2011) states that mortgage loan originators may not receive compensation based on the interest rate or other loan terms.

The Federal Reserve Board (Board) has published final rules amending Regulation Z, which implements the Truth in Lending Act and Home Ownership and Equity Protection Act. The purpose of the final rule is to protect consumers in the mortgage market from unfair or abusive lending practices that can arise from certain loan originator compensation practices, while preserving responsible lending and sustainable homeownership. The final rule prohibits payments to loan originators, which includes mortgage brokers and loan officers, based on the terms or conditions of the transaction other than the amount of credit extended. The final rule further prohibits any person other than the consumer from paying compensation to a loan originator in a transaction where the consumer pays the loan originator directly.

The Board is also finalizing the rule that prohibits loan originators from steering consumers to consummate a loan not in their interest based on the fact that the loan originator will receive greater compensation for such loan. The final rules apply to closed-end transactions secured by a dwelling where the creditor receives a loan application on or after April 1, 2011.

Another law, SB 1137 (eff. Jan. 1, 2011 which amends Sections 10137, 10139, 10166.01, and 10166.02 and adds Section 10166.051 of the CA Business and Professions Code; Amends Sections 22104, 22107, 22109.1, 22109.4, 22112, 50002, 50141, 50144, and 50700 of the CA Financial Code) regulates mortgage loan originators and their license endorsements.

Among other provisions, this law makes it unlawful for a real estate broker to employ or compensate, directly or indirectly, any licensee for engaging in any activity for which a mortgage loan originator license endorsement is required if that licensee does not hold a mortgage loan originator license endorsement. It is a crime for a person to act as a mortgage loan originator without a license endorsement or to advertise using words indicating the person is a real estate salesperson or a mortgage loan originator without having a license or license endorsement. It also authorizes the DRE Commissioner to deny, suspend, revoke, restrict, condition, or decline to renew a mortgage loan originator license endorsement, or take other actions, after notice and opportunity for a hearing, under specified conditions. See the DRE Web page for all the details at http://www.dre.ca.gov/lic_sb36_safe.html.

In addition, this law requires a licensed finance lender or broker that employs one or more mortgage loan originators that makes residential mortgage loans to maintain a net worth of $250,000 and if only arranging but not making such loans to maintain a net worth of $50,000.

For more information visit: www.crestico.com

HAFA under HAMP: What is it?

With the current state of the economy and more particularly, the housing market, it is easy to get lost and confused about the programs available for distressed homeowners. In March, 2009. President Obama introduced the Home Affordable Modification Program in connection with his Making Home Affordable (MHA) plan. These plans and programs represent efforts on behalf of the Obama Administration to allow borrowers who are eligible (according a specific set of standards and guidelines) to avoid foreclosure by modifying their loans to a level that is affordable and sustainable for the long-term.

The recently announced Home Affordable Foreclosure Alternatives program (HAFA), which provides instructions for lenders and servicers participating in the Making Home Affordable Program and HAMP. HAFA is designed to streamline the short sale and deed-in-lieu process. Specifically, the program is aimed at presenting an alternative to foreclosure homeowners who were either ineligible or unable to get loan modifications for their existing loans and mortgages, as prescribed by HAMP. Additionally, another of HAFA’s goals is to establish and maintain clear and easily understandable timelines, that are capable of being enforced against servicers. These timelines are intended to urge the servicers of these loans to respond and grant relief to the homeowners in a timely manner.

Under HAFA, short sales will be permitted if they are pre-approved before a property is listed on the market. This way, the servicers of the loans will not be able to reduce the commissions available to the hardworking professionals helping the distressed homeowners. Additionally, borrowers will be freed from future liability for the debt and there will be financial incentives created for borrowers, servicers and investors alike.

Specifically, HAFA sets a deadline of three business days to submit an executed purchase offer to the servicer with regard to a short sale and the servicer then has ten business days to respond to the offer, thereby speeding up and clarifying the process. This standardization works to the benefit of everyone involved. Although servicers are still allowed to negotiate commissions (not to exceed 6 percent), they are only allowed to do before the property is listed and not after.

Also, the servicer will still be able to decide on the minimum net proceeds for a short sale; however if an offer presented to the servicer by the borrower or listing broker meets the net proceeds requirement, then the servicer must accept it. This creates a beneficial environment for the selling homeowners and the potential buyers making offers.

To further facilitate this process, each participating servicer is also required to establish and uphold a written policy that describes the basis and terms upon which it will offer the HAFA program to its borrowers. However, it must be noted that all borrowers must be evaluated for a loan modification under HAMP before they can avail themselves of benefits under HAFA.

Finally, HAFA goes into effect on April 5, 2010, however the industry rumors are leaning toward the earlier implementation of this program by servicers. Currently, the program is available only for non-Fannie Mae- or Freddie Mac-owned loans up to $729,750 but this may change in the future.

We at Crestico Realty believe in staying informed and up to date regarding events in the market that can affect each and every current and future client we may have! Please feel free to contact us with any questions or concerns you have and we will do our best to help!

Conforming Loans: What Are They and What Does An Extension Mean To You?

Recent Developments Regarding Conforming Loans

Media outlets are constantly reporting on the state of the economy, the housing crisis and mortgage defaults and delinquencies. Amidst these reports is the constant use of many terms the average American (homeowner or not) may not be too familiar with or even have a complete understanding of their definitions. One of these terms is "conforming loan." Now, we all know what a loan is; generally a borrowed sum of money that is to be repaid with interest to a lender. A conforming loan however, is a specific type of loan. Loans are classified as meeting and not-meeting GSE guidelines. GSEs, Government Sponsored Entities, are financial services corporations that have been formed by congress, the most popular of which are Fannie Mae and Freddie Mac. These GSEs set guidelines for the types of loan programs that are available to homeowners. Conforming loans meet these guidelines and, as a result, are part of the uniform mortgage documents and national standards that have been set for loans.

On October 30, 2009 President Obama signed a congressional resolution regarding conforming loans. This resolution basically allows the loan limit of $729,750 (the limit for high-cost areas, such as Southern California) to be extended into next year. This means that there is now a longer time period available for potential buyers to seek and gain approval for government loans to purchase their homes. Government loans offer advantages such as lower interest rates, government guarantees and lower down payment requirements to homebuyers which make the purchase of a home a bit easier and more widely accessible. This extension is the result of a move by the government in 2008 Housing and Economic Recovery Act which was originally intended to be temporary. Homes are becoming increasingly affordable in the Southern California area, and this is one more step in that direction.

If you are considering buying a home or simply have questions regarding the process, a knowledgeable and qualified real estate agent is the best resource you can have to guide you in making your decisions. Real estate agents are on the cutting edge of breaking news and in the best position to explain your options and most beneficial decisions to you.

DTI – Debt to Income Ratio – What is it and How Does if Affect Buying a Home

It’s a buyer’s market!! You’ve read it, you’ve heard it and you see it everywhere you go. Signs, slogans and ads telling you it’s a buyer’s market and to get out there and buy a home! But before you log on to your local MLS or start going to open houses in your dream neighborhood, there’s one thing you should do to prepare yourself. You need to figure out HOW MUCH of a home you can afford to get out there and buy. There is no worse feeling in my opinion, then taking a tour of a gorgeous house, falling in love with it, mentally moving in and arranging your furniture JUST to find out that you can not afford it after all.

A major factor in owning a home is being able to afford it. Now, I’m not just talking about the expenses that come with home ownership in terms of maintenance, decorating, furnishing and tax. I am talking about the mortgage. Now, unless your rich Uncle Frank is leaving you a hefty inheritance, you are going to need to figure out your total monthly income and something called your DTI. This is your Debt to Income Ratio. This little fraction is going to be a key factor in the bank’s decision regarding how much money to loan you to buy your home. Basically, this is going to be a numerical expression of how much of your monthly income is already spent on bills and other expenses.

Now there are two different types of DTI: front and back. Front DTI is basically the amount of your income that is going towards your current housing costs, rent for renters and principal, interest, tax and insurance for homeowners. The other DTI is back which is basically the amount of your income that goes towards expenses like car payments, phone bills, credit cards and other kinds of recurring debt.

In order to get an FHA Loan, your front DTI needs to be about 31% which means that if your monthly income (gross) is $5,000, your payment cannot be more than $1,550. Conventional loans allow for a DTI as high as 33% which would make your payment a maximum of $1,650. Next you will need to determine your back DTI which is also based on your monthly income. Your back DTI reflects your debt and for an FHA loan is about 43% and a conforming is about 45%.

So, on that $5,000 monthly income of yours, you can have $2,150 in monthly payments for an FHA loan and $2,250 for a conventional loan. So if your car payment, student loans, credit cards, phone bill and child support expenses are less than $600 ($2,150 – $1,550), you will effectively qualify for an FHA loan.

This is something you should consider when deciding on buying a home. Although it is a buyer’s market, and there are several great deals out there; you want to make sure that a home you buy will be a home you can KEEP and that your home won’t turn into someone else’s great deal after you realize you can’t make your mortgage!

For More Information Please Visit http://www.crestico.com – http://www.cresticorealty.com

Struggling Homeowners – Help From the President!!!

President Barack Obama has introduced many ideas and programs in efforts to provide guidance and aid to the millions of struggling homeowners in this country. The sub prime mortgage crisis, fueled by the greed and often negligence of the lending industry's major players has left millions of homeowners facing the worrisome prospect of losing their homes. On February 18, 2009, President Obama introduced the nation to his housing plan.

This plan involves several programs which are designed to help over seven million families potentially facing foreclosure to avoid the grief and stress of a foreclosure by giving them options. These options will include either refinancing or modifying their existing mortgages in hopes of ultimately making those mortgages become affordable and bearable once again. Additionally, Obama's program intends to reinforce and revitalize the federal government's commitment to Government Sponsored Entities, Fannie Mae and Freddie Mac, leaders in the secondary mortgage market.

On March 4, 2009, President Obama's administration released news and information that detailed the intricacies of the program and provided guidance on the Making Home Affordable Program.

While there are several characteristics and facets of this program, the main points for homeowners to know are listed below.

1. The Home Affordable Refinance Program. Under this program, eligible borrowers may refinance loans that Fannie Mae or Freddie Mac (the government sponsored enterprises, or GSEs) own or guarantee. The program can help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent. Cash out refinancings are not permitted. The program ends in June 2010.

2. The Home Affordable Modification Program. This is a $75 billion program with lender, servicer, investor, and borrower incentives to make it work. The program is limited to homeowner-occupants who are at risk of default or already in default and who have loans at or below the maximum GSE conforming loan limit of $729,750 (or higher for 2-, 3-, and 4-unit properties). Loan modifications under the program may be made until December 31, 2012.

3. More Support for the GSEs. President Obama also announced more support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth. The plan also raises the cap on mortgages that the GSEs may hold in their portfolios by $50 billion to $900 billion.

Ultimately, this program intends to set this country back on the path to growth, profitability and success. Hopefully, with the government's continued support and diligence on the part of homeowners, we, as a nation, will begin to see the signs of recovery soon.

Mitra Karimi, President
Crestico Realty
http://www.crestico.com
For More Information Please Visit http://www.crestico.com – http://www.cresticorealty.com