I got this announcement in an email from a lender. =>Fannie Mae Guidelines It contains some good news and some bad news for marginal credit borrowers. These changes will take effect May 19th Seems as though Fannie Mae may be getting a little more conservative on their approvals for the High Risk, High LTV/CLTV loans.
What does that mean? Quite simply, some high risk loans will be getting approvals with ‘Levels’ attached. Which means that they will be paying .5% to 1.5% higher rates than a low risk client. I see this as prudent and very fair for the borrowers. These levels have always existed, so that is nothing new. But the higher risk stuff will be getting ‘leveled’ more often now.
Another announcement, and this is a biggie, is that they do not require collections be paid regardless of amounts. Remember the “collections allowed up to $5,000″? They will now allow unlimited collections that do not affect title. So, the guy who has a 6yr old chargeoff for $5,500 can get into a conforming loan without paying off his collection. Fannie Mae used to require all collection paid if they added up to over $5,000. The presence of collections will still go into the risk analysis of the loan. I could speculate on why these changes are being made….. but it would only be a guess. Who knows what all goes into their risk analysis thinking. But I suspect that Fannie is learning what we knew all along. Some borrowers with old collections can still pay their mortgages on time. And that an arbitrary $5K limit did not make sense. The net result is going to be a little higher rate for the 100% loans as a result of the Expanded Level Approval. And some folks with great recent credit may be able to get into conforming rates regardless of old collections.
Is your loan officer running EVERY FILE through Automated Underwriting? They should be….. because a lot of these people in subprime loans probably would have qualified for something better….. a Conforming Loan.
Tom Burris
DallasLoanGuy.com
Texas Home Loans
While this is a shady business tactic…. it isn’t illegal YET!!!
I received an email saying this was being voted on May 2007. You need to be heard so please contact Texas Legislature. The bill states it takes effect Sept 2007…..so hurry. If you do not know who to write or how to contact your legislators, then follow this weblink to find out how to contact them by email: http://www.capitol.state.tx.us/resources/FAQ.aspx#2
The background on this is that builders have gone from offering a small incentive to go to their mortgage company to now withholding up to $25,000 in upgrades if a buyer doesn’t go to their mortgage company. As a result, an unsuspecting buyer signs a contract with that incentive/penalty, after being assured that the builder’s mortgage company will offer a market rate and costs, only to find out prior to closing that the rate is considerably higher than the market but they can’t get out of the contract at that point - - and are stuck choosing between losing thousands of dollars on the mortgage or losing thousands of dollars of their own purchase money that was supposed to go toward the house. This bill can stop that practice if you and your friends will write your legislators.
House Bill #3798 A BILL TO BE ENTITLED AN ACT Relating to certain sellers of homes offering a benefit contingent on the use of a specific mortgage lender. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter D, Chapter 35, Business & Commerce Code, is amended by adding Section 35.65 to read as follows: Sec. 35.65. SELLER PROHIBITED FROM MAKING BENEFIT CONTINGENT ON USE OF MORTGAGE LENDER. (a) A person who builds and sells a single-family residence may not offer or provide a benefit to a potential purchaser of the residence as consideration for the purchaser’s agreement to use a mortgage lender specified by the person for a loan to purchase the residence. (b) A person who violates Subsection (a) is liable to the purchaser for: (1) any damages arising from the violation; and (2) reasonable attorney’s fees and costs. (c) A purchaser may not waive the right to sue under Subsection (b). SECTION 2. This Act applies only to the sale of a single-family residence closed on or after the effective date of this Act. SECTION 3. This Act takes effect September 1, 2007.
http://www.legis.state.tx.us/tlodocs/80R/billtext/pdf/HB03798I.pdf <== copy of the text of this bill.