Franklin, AL Community

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Debra Luke

Member since: Nov 06, 2007
Last activity: Mar 20, 2008

  • FNMA and FMAC's new fees fly in the face of the Fed's resolve to reduce rates.

    At the same time the Fed is speculated to reduce rates from .25 to .5 a point, Fannie Mae and Freddie Mac conspire to tack appalling fees to their loans. No. These are not fees applicable only to sub-prime borrowers, these fees are directed at the prime borrower (credit scores of 620 and above.)

    An FHA loan previously included a 1.5% up-front fee for PMI. Now, if you have a score of less than 620 to 639, you can just tack another 1.75% onto your fees.

    OUCH! What are they thinking? On a $200K purchase, the PMI adds $3000 to the pre-paid finance charges. With the new fees imposed by Fannie Mae and Freddie Mac an additional $3500 will be required in pre-paid finance charges for anyone with a score between 620 - 639.

    The only way to make that up-front fee go away is to increase the interest rate, but it just doesn't work that way. Most lenders cap yield spread premium on FHA loans to such a low amount that raising the rate to cover the new up-front fee isn't an option. This is cash out of pocket folks. Pockets that are already being turned inside out, picking through the lint to find the money to get into a home.

    Fee Structure Based on Credit Score

    < 620 2.0 % 620 - 639 1.75% 640 - 659 1.25% 660 - 679 0.75

    Come on, Uncle Sam. Do you really think we can afford any more help like this?

    Posted Dec 10, 2007, in Community-wide general discussion
  • THE TAX MAN COMETH. PAY HIM!

    As a mortgage lender, I see it time and time again. Self-employed individuals who make a game of writing off as much income as possible.

    My hypothetical client owns an auto repair shop. He's a sole proprietor. The business actually has a lovely annual income, which he then writes off nearly every penny of. He even writes off his house payment. No big deal you say. After all, the money gods did create the stated income loan for just such a scenario did they not?

    True, true. They did. However, the Fed gods countered with the form 4506. i.e. Let's see what they tell Uncle Sam they make after all those expenses. This is what the loan originator and banks have to live with today.

    So, the outcome for Mr Hypothetical? Because he chose to write off all his income and could have taken better care of his credit . He may be stuck in an adjustable rate mortgage that just adjusted to 9.5% interest only, in an area of the country experiencing declining values.

    Now I'm not not suggesting that you don't take advantage of tax deductions where they make sense, just make sure you have enough "paper" income left over to live on, The premium for obtaining a stated income loan is increasing all the time, while the availability of such a loan is decreasing just as sharply. (720 credit score required for a decent rate.)

    Words of wisdom to live by or share with your clients.

    THE TAX MAN COMETH. PAY HIM!

    Posted Dec 06, 2007, in Community-wide general discussion | 3 replies