BradyLoan.com

WTH Just Happened to the FHA Mortgage Insurance Premium? Politics At HUD

If you have an FHA loan in process this month. you were "given a gift" only to have it "taken away" nine days later.    It was a political stunt by past HUD Chairman Julian Castro and it's a darned shame it happened to you.  Let me break it down for you:

The FHA charges borrowers money to insure their loan against default.  It adds 1.75% to your loan and charges a monthly mortgage insurance premium in addition to that added 1.75%.  You can avoid this by having at least a 20% down payment and getting a conventional loan (although FHA rates are lower than conventional rates)

The FHA monthly mortgage insurance premium WAS  based on an annual charge of .5% of the loan amount prior to the Obama Administration taking office.  During the housing crash, the FHA insurance pool (the money collected from the premiums) was depleted because of all the foreclosures.  The first term Obama HUD Secretary (Shaun Donovan ) started to increase the monthly mortgage insurance premium cost, from the annual charge of .5%,  to an annual charge of 1.4%.  This increased the monthly cost of a new $400,000 FHA loan  from $166/month to $466/month.

This was a bummer for new FHA borrowers because they were essentially paying for the failures of the past borrowers.  Still, if FHA was going to be sustainable, it had to do something so they opted this approach. It worked.  The FHA insurance pool grew from being depleted to sustainable.  As the size of the FHA reserve pool increased, the HUD Secretary during Obama's second term (Julian Castro)  started reducing the monthly mortgage premium from an annual charge of 1.4% to its current annual charge of .8%.  This reduced those monthly mortgage costs (on a $400,000 loan)  from $466 to $266.  

A few months ago, HUD Secretary Julian Castro floated another premium cut from its current .80% annual cost to .55% annual cost.  This would reduce the monthly cost (on a $400,000 loan) from $266 to $183.  This move was met with vocal opposition from career HUD bureaucrats and the Republicans in Congress.  The prevailing thought was to leave the annual FHA mortgage premium be for now and let the reserve fund grow more. 

HUD Secretary Castro ignored the advice of career HUD bureaucrats and issued the order to cut the FHA monthly mortgage cost anyway.  He issued this order on January 11, 2017 to take effect for loans FUNDED after January 27, 2017.  I thought this was suspicious when he issued it because all previous HUD orders were effective for loans STARTED after the effective date.  This seemed "too good to be true".  

If it looks too good to be true, it usually is untrue.  HUD Secretary Castro's order, breaking with normal HUD policy on effective dates, was a legitimate HUD order anyway.  We (like other lenders and REALTORS) delayed closings so that borrowers would benefit from the monthly cost reduction.  Here's what you need to know:

Castro's FHA order to reduce costs was never gonna happen and Castro knew it when he issued it on January 11, 2017.

Castro was playing politics with borrowers' money.  His intention was to put the new HUD Secretary (Dr. Ben Carson)  and the new President into the tough spot of saying "Sorry.  This was never a good idea".  As such, Castro timed the repeal of the January 11, 2017 FHA order to come out just an hour before the new President was inaugurated.  Castro was quick to release this repeal order to the media so that it could run with the story that "The New President RAISED FHA monthly mortgage costs".  

Let me give you a simple analogy:

I am the principal of  a school and you are taking my job next Friday.  Last month. I asked all the teachers if we could cut the dismissal time from 3PM to 2PM,  The teachers said "this is a bad idea" and you (the new principal) agreed with the teachers. Last week, I ignored the teachers advice and sent an email to all of the pupils saying that the new dismissal time would be 2PM, effective the Monday after you become the new principal.    My last act as principal, before I hand you the keys to the school, will be to send an email to the pupils saying "Sorry, the new principal might be a meanie so I can't keep that 2PM promise to you".  Guess who won't be popular with his new pupils next Monday?  You.

It's political scheming and it's garbage.  The Obama Administration took a parting shot at the incoming Trump Administration and, if you have an FHA loan in process, you are the loser in this political game.  In my opinion, the incoming Administration should honor the reduction for 30 days and restore the (higher)  premium for loans funded after February 28, 2017.  They might not have time to do that and I don't make policy so, if you have an FHA loan in process, expect to pay the original (higher)  amount.

 

January 18, 2017 Mortgage Rates Report and New Listings

Mortgage rates are at the lowest levels since the week after the November election,    VA/FHA rates are still under 3.99% and conventional rates are above 4.125%.    

Right after the New Year, I suggested that rates would be lower at the end of January but higher by this summer.  This gives buyers a good opportunity to move quickly. There is no guarantee that rates will move lower in February, but at the very least it leaves buyers with more options.  

Check out our hot homes list.  These are new-to-market listings. all over San Diego County, for single-family homes. If you want to narrow this list down to a specific area, call 858-777-9751 and we will tailor the list for you.

VA Condominium Approvals Are Easy, We Close Them In 45 Days

Seven years ago, I said this about our ability to get condominiums added to the VA Approved condominium list in California:

I've probably funded 40 VA home loans in 2009, many of them for unapproved condominium complexes.  In Southern California, it's quite common along the coastal communities for buyers to look at condos, townhomes, or PUDs as lower-cost alternatives to single-family homes.  Declining prices, along with higher VA loan limits have afforded many active duty and former service members the opportunity to scoop up a piece of the California coastal lifestyle by purchasing one of those properties.

Sellers often cringe when they receive an offer using VA home loan financing.  The general thought is that the VA condominum complex approval process is time-consuming, onerous, and difficult...

Nothing could be further from the truth.

All loan types, including FHA and conventional vet the condominium association's organizational documents, finances, and residency mix.  In fact, the VA guidelines tend to be the least restrictive of all three loan types.

Over a year ago, we started getting the complexes VA approved without the use of an attorney opinion letter, saving our clients thousands of dollars in legal fees. Here are some comments from happy customers:

Air Force veteran, Marina del Rey:

Brian and Debra helped us through the loan approval process for a townhouse in Marina del Rey.  My husband was trying to use his VA loan benefit, but in this hot real estate market, a lot of the seller's don't understand or care to understand the VA loan process.  There's just a big misconception that the process is unduly difficult, or the VA loan is not as good, which is not the case at all!

Brian went above and beyond and talked repeatedly to our seller's agent to assure her that the VA loan process would be fine.  Anytime she had a question, she would call him.  When we closed, she went on and on about what a professional he was throughout.

Brian and Debra helped us to get our townhouse a VA condo association approval.  It was daunting for us, since we didn't know how to get through it, but they started our paperwork as soon as we got an accepted offer, and made sure all the proper documents were gathered and sent to the VA.  The VA is notorious for being slow, but they managed to get our condo association VA approved by the closing date.  We could not have done it without them

USMC Officer, Los Angeles, CA:

I, like many other of Brian and Debra's clients, wanted to use my VA loan and wanted someone with expertise with VA loans.  My situation was also complicated by the fact that condominiums / townhouse complexes must be VA approved for the VA loan to be used.  Fortunately, Brian and Debra have done over a hundred VA condo complex approvals and are experts with the VA loan process.  Working with them made my life very easy.  Brian was able to educate my real estate agent and the seller's real estate agent on the pros and cons of the VA loan and let them know what he would need to facilitate the home purchase.  He was always reachable, whether at 7 am in the morning or 9:30 pm at night, Brian always responded within an hour.

US Navy Officer, San Diego, CA:

OUTSTANDING experience during my first time condo purchase working with Brian and Debra.   Brian came referred by 2 of my co-workers, and I could not be happier that I decided to use him.  From start to finish, Brian and Debra handled my purchase as if they were buying it for themselves.  They continuously kept me in the loop, and answered emails promptly.  Brian went out of his way to work with the VA to get my condo approved in record time, and watched the market closely to get me the best possible VA rate.  I was impressed with their professionalism during the entire process

US Navy Officer,  Oxnard, CA:

We were told by our agents and their lender that the condo we were buying was on the VA Approved list, and all was good to go. Once into escrow, we learn it was not. Our agents said "we are sorry" and basically gave up. So we quickly figured out if we wanted this home, that we needed to get it on the VA Approved list of condos and quick. Google search. Up comes Brian. We call, and he calls back immediately even though it was quite late that night. We met the next day, and he took control of the process guiding both agents (buyer and seller) through the process. We closed and have the home we always wanted. He is a pit bull kind of guy who gets it done.

US Navy Officer, San Diego, CA:

I started the home buying process while still on deployment, and Brian graciously worked with me across 13 time zones to begin explaining the ins and outs of home buying.  The building we had looked at was not VA approved, which is crucial to securing a VA loan.  I googled VA home approval, and his was the first name to pop up.  Brian is an absolute master at working with the VA, within 5 weeks from putting in an offer on the home, the complex was VA approved, and we closed within six

We can help you with this process.  Call ,e at 858-777-9751

San Diego Mortgage Rates Report: January, 2017

WHERE ARE SAN DIEGO MORTGAGE RATES GOING?

Non-farm payrolls reported today at 156K vs. the expected 178K;  the unemployment rate ticked up to 4.7%. The mortgage bond market is DOWN a quarter point. That doesn't compute.

Today's released data also signaled an uptick in wage growth. Uh oh, that means we are seeing inflation, right?

Not so fast. As Debra points out, a lot of minimum wage laws were passed; 19 states raised the minimum wage effective Jan 1. Businesses often meet those laws prior to the effective date to be in compliance.

The wage growth is probably just a reaction to legislation rather than organic growth. It's a "false positive".

I still think we see lower mortgage rates at the end of January and higher mortgage rates at the end of the summer. If you want to know how this would affect you, call me at 858-777-9751.  A real conversation, with someone who has worked in capital markets for three decades, will give you greater insight