One of the most popular looks for teen hairstyles today is ashlee simpson hairstyles.  She has had so many different looks through the years.  There is not wonder she is such a trendsetter.

The Government takeover of Fannie Mae and Freddie Mac is making its mark on the bond market.  Mortgage Backed Securities are up +150bp!  Fannie Mae mortgage bonds now are guaranteed by the US Government and investors are buying them up.  This should help drive down mortgage rates and hopefully get the housing marketing moving again.  With Mortgage Bonds being such a hot commodity the US Government now will need some low risk mortgages to secure them against.  I do not personally believe the mortgage crisis is over, but low mortgage rates can’t hurt our industry!

Unemployment Rate May | 5.5% | E 5.1% | P 5.0% | Elevated

Average Work Week May | ? | E 33.7 | P 33.7 | Elevated

Hourly Earnings May | 0.3% | E 0.2% | P 0.1% | Elevated

Fannie Mae Desktop Underwriter 7.0 is here!

In order to approve most mortgage loans, bankers submit their client’s loan application to Fannie Mae’s computer underwriting software.  Desktop Underwriter or DU is the name of the underwriting engine.  DU calculates all of a client’s risk factors to see if they are a good candidate for lending.  As I always say the lower the risk, the lower the rate!  In the newest update to DU certain risk factors are now considered higher risk than before.  This means that is will be even harder for most people to be financed and not possible for many.  Below are the highlights of tightened underwriting policy.

• Mortgage Insurance will no longer be considered a risk factor.  DU previously considered the presence of Mortgage Insurance as lower risk.  The amount of equity or down payment is still one of the highest weighted risk factors.

• Purchase vs. Refinance.  Purchases are still considered lower risk than refinances.  DU did factor in the unpaid principle balance [the amount you currently owe] increasing as higher risk.  Now DU will look only at the amount of cash-out when weighing risk.  Cash-out Refinances are higher risk than Limited Cash-out refinance [refinances the just lower your rate or term].

• Loan Term.  DU considers shortening a mortgages term as a good risk.  Fannie will continue to consider a shorten term lower risk, but no longer groups it with Loan to Value.

• Loan Type.  Interest Only Mortgages are now considered much higher risk then normal amortizing loans.  The new order of RISK is 30-5 Year Fixed Rate, 5-10 Year Adjustable Rate, 6m-3 Year Adjustable Rate and Interest Only Fixed Mortgages, and lastly Interest Only ARM’s and Balloon Mortgages.

• A Minimum Credit Score of 580 is required.  As long as Mortgage Insurance was not an issue, lower credit scores were allowed on Fannie Mae Refinances and Purchases.  Now 580 is the floor.

• Property Type.  Property Type has become a higher risk factor in today’s market.  Condos are higher risk than once thought.  The new RISK order is Single Family properties not in a co-op or attached, Attached Condominiums and Two-Unit properties, Three to Four Unit homes, then lastly Manufactured Homes.

• Self Employment is no longer considered a risk factor.

• Expense Ratio.  Clients could approve up to 65% Debt to Income previously.  Now debt ratios above 45% will be difficult to approve.

• A Previous Foreclosure used to prevent clients from buying for 2 years.  Fannie Mae now requires 5 years out of foreclosure before being able to approve for financing.

Fannie Mae has been trying to clean up its mortgage portfolio ever since the Mortgage Crisis started.  These updates are the next step in lowering their overall risk. 

Sellers don’t need any more creative gift ideas, the gift of 100% financing is in their hands!

We can offer 0% Down 30 Year Fixed Mortgages @ 6.500% when sellers gift their buyers down payment.

• No Minimum Buyer Contribution
• Low Mortgage Insurance
• Sellers can credit 3% for closing cost
• Sellers must credit 3-10% for down payment
• Up to $281,250
• No Pre-Payment Penalty
• Minimum Credit Score 580

Tell your Friends!

Cornerstone Mortgage has Local Second Mortgage Rates from 6.180%.  The Fixed Second Mortgages are great for avoiding mortgage insurance and jumbo mortgage rates.  We can lend up to 95% loan to value and down to a 640 fico credit score.  The St. Louis Local Second Mortgages are available to $200,000.  Please contact me, Chris Grau, at 314-600-5410 for more information.

Even though ”Billions of Dollars” are being thrown to Fannie Mae and Freddie Mac, it may be a while before we can feel the impact.  The mortgage industry in the Mid-West has been getting more acquainted with the term “declining market” in recent weeks.  In order to be sure the home you are buying is not in a declining market mortgage bankers must cross reference the investors definition, the mortgage insurance company’s definition, Fannie Mae’s definition, and the appraisal to be certain.  St. Louis is a conservative market, and most investors are considering us declining.  More inventories from increased foreclosures and restricted lending will certainly continue the “declining market” trend, pretty much requiring borrowers to have at least 10% down and 720 credit scores. 

“How do I buy a home with 3% down and credit scores in the 600′s?”

The Federal Housing Administration [FHA] has continued aggressive lending requirements.  Approved FHA Mortgage Lenders can offer home buyers the ability to purchase a home with only a 3% minimum investment.  The restrictions for “declining markets” are not being felt as strongly with FHA loan programs.  There are no set credit score requirements for FHA lending, but the automated underwriting system does not usually approve under 620 credit scores without substantcial compensating risk factors.  The mortgage insurance monthly premium requirement is less than most Fannie Mae comparable loan programs.  Interest rates for FHA lending has been hovering near 6%.  The FHA loans are definitely the answer for the near future when purchaing a home with less than 20% down.

The Federal Reserve announced today that they will expand their securities lending.  The move they have decided to make basically upgrades mortgage backed securtities.  Through the Term Securities Lending Facility the FED loan up to $200 billion worth of Treasury Bonds for terms of 28 days when they are secured with select Mortgage Backed Securities.  The FED had only lent overnight up to now.  This is a good move for the economy and in the long term a good move for bonds.  The security this gives the market has pushed the down up +200 points.  The FNMA 30 Year Bond market is trading lower on the day. 

The Fed also has approved reciprocal currency arrangements with the European Central Bank [up to $30,000,000,000] and the Swiss National Bank [up to $2,000,000,000]. 

Yesterday, Fannie Mae “in light of the continued deterioration in the housing market” has decided to discourage more people from buying homes.  They will be charging aditonal loan level price adjustments for loans they consider risky.  I have listed some highlights of the new penalties.  When reading the following information it is important to note that each .40-.50 mean an additional .125% penalty to your interest rate.  It is important to note that without a 680 credit score, most mortgage insurance companies require 5% down. 

The Loan Level Price Adjustments will make it more important than ever to work with an FHA approved lender.  The Grau Team at Cornerstone Mortgage is able to offer the best FHA rates in the nation.  You can apply online now to see what we can do for you.

Loan to Value Penalties for ALL Mortgages

>720 credit | No Penalty 

680-719 credit | >70% = .500% points [about +.125% rate for less than 30% down]

660-679 credit | >75% = 1.25% points [about +.375% rate increase <25% down]

640-659 credit | >75% = 1.75% points [about +.500% rate increase <25% down]

620-639 credit | >75% = 2.5% points [about +625% rate increase <25% down]

<620 credit | >75% = 2.75% points [about +725% rate increase <25% down]