Sacramento Real Estate Blogging

A new array of challenges has hit the battered mortgage industry. Pros and Cons alike are both heavy in the new version of RESPA, or the Real Estate Procedures Settlement act. HUD (housing and urban development), the overseer of these laws and policies, has had made some sweeping changes to the required documents.

The primary thing is the new Good Faith Estimate. There have been a multitude of changes to this document, and we don’t have space to cover all of them but here’s the highlights:

• 6 pieces of data must be collected before a GFE is required: borrower’s name, social security # for pulling credit, monthly income, property address, loan amount sought, estimated value of property.
• New Good Faith Estimate must be issued to the person applying for a mortgage within 3 days of application.
• After, origination, points, YSP and lender fees CANNOT CHANGE*.
• Effective now GFE’s and HUD sheets must contain much more info such as length of time rate/fees are good for and the prepayment penalty
• After, 3rd party fees such as title, escrow etc can change but have different tolerances (I E they can only change 10% from original and so on) depending on if the borrower picked that 3rd party provide or not.
• * Broker/lender fees can change in a few exception scenarios such as change in loan type, borrower request, new construction and a handful of other loopholes. However, there is still a process and the borrower must sign a letter of intent before a new GFE is issued.
• There is a 10 day waiting period after issuance of the original good faith estimate before a revised one can be sent for any reason.
• There is a phase in period for the new GFE which is complex by itself. See the links below for a full explanation.

I could go on and on. The mortgage broker I work for has had us go through several hours of classes and we have had more than a few meetings about the new Good Faith Estimate and all the changes. There is one vital analysis that we’ve made- since the GFE is triggered on 6 pieces of information, one being property address, this means on purchase preapproval situations wont require a GFE for compliance. For loan originators this is vital. If you are a realtor or loan officer you should check out this very excellent reference card here RESPA_MDIA Quick Reference Guide.

Some other documents for your review:

Settlement Booklet December 15 REVISED this by law must go out with all GFE’s

RESPA Manual FINAL pretty large

HUD’s consumer testing report of the new GFE while looking for something else, I stumbled on this crazy document. Behold.

And so, in summation: This new red tape will not be an obstacle to quality mortgage brokers who take pride in their ethics, morals and customer service. I do think that the consumer will receive both benefits and detriments due to the new RESPA. On the one hand it will be very difficult for shady loan officers to bait and switch anymore. On the other hand Real Estate is never without it’s surprises and I can see this being very difficult to work with. I estimate that these changes will add another 1-2 hours of compliance to my work week.

Sacramento Homebuyers, get happy! The Federal government has pushed the $8000 tax credit for qualified first-time home buyers who are buying a principal residence. This credit now works for purchases happening on or after Jan 1st, 2009 to on or before April 30th, 2010. The exception is where a sales agreement is inked by April 30th, 2010, if the purchase is closed by June 30, 2010 the tax credit will still apply.

For purchases happening after November 6, 2009, there is now income limits of $125,000 for single tax filers and $225,000 for couples filing joint returns. Limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009: $75,000 for single and $150,000 for married. These limits do not apply to just Sacramento residents, they apply nationally.

Who is eligible to claim the $8,000 tax credit?

Sacramento First-time buyers can purchase any kind of home and receive the tax credit. To qualify this purchase must occur in the date ranges described above. 
Sadly, persons who are claimed as dependents by another taxpayer or who are underage do not qualify for this tax credit.

What is the definition of a first-time home buyer?
The law states “first-time home buyer” as a someone who has not owned a principal residence for 3 years prior to the purchase. For married couples, the restriction applies to both home buyer and his/her spouse. Buying a home in Sacramento CA? Remember VA & FHA loans require your spouse to apply for the loan along with you even if they won’t be on the mortgage.

How’s the dollar amount of the tax credit worked out?

The credit maximum is 10% of home purchase price up to a max of $8,000.

More info

I have a former co-worker of mine who just shared her story with me about her loan that was modified. I have talked to many people about loan modifications and it seems that they “know someone who knows someone” who got their principal cut or rate lowered by an amazing amount. I heard this story first hand and thought I should share it with everyone that I know. I think we all know people who are in a similar situation with an adjustable rate mortgage…

Here is her story:

• loan is with Citibank, was an interest only loan that would adjust in 2011
• stopped making payments in November 2008
• wrote a letter about her situation as soon as she stopped making payments
• sent in the paperwork they requested
• kept calling and made notes every time she called. Talked to people in Loss Mitigation Department

How the lender modified her loan (after 8 months):

• tacked on missed payments to the end of loan
• adjusted mortgage from 30 year to 40 year
• changed interest rate to 2.875 for first year, 3.875 for second year, and 4.875 for 3rd year and beyond

With this said, she did not get her principal reduced but, she is now in a payment that she can afford. She did not have to pay a loan modification company but did have to have patience and determination. She is no longer worrying about her loan adjusting. She mentioned to me that it helped that she did everything in writing instead of just calling the bank.

I hope this gives some of you hope .