The CFPB is beefing up its ongoing investigation into Zillow for possibly violating RESPA. Full article here from my friends at HousingWire You’ve been warned: CFPB puts Realtors, Lenders on RESPA violation watch
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Your right to privacy is a significant concern for mortgage professionals who are involved in the solicitation, origination, processing, closing and servicing of mortgage transactions. Multiple laws protect the privacy of borrowers, and violation of these laws can result in serious liability. Privacy laws protect borrowers from the time they receive a solicitation for a mortgage loan until their loans are repaid.
The actions that are necessary to maintain compliance with privacy laws are an ongoing concern for mortgage professionals. Distinct privacy issues arise at each stage of a lending transaction, and additional issues arise while servicing a mortgage loan:
- Completion of a Loan Application: Under the Gramm-Leach-Bliley Act (GLB Act), a consumer becomes a customer, earning special protections of his/her personal financial information, when completing an application for a mortgage.
- Processing of a Loan Application: While processing a loan application, lenders and other settlement service providers exchange personal financial information about the loan applicant. The Fair Credit Reporting Act (FCRA) protects the privacy of information that a lender and a consumer-reporting agency exchange. The Gramm-Leach-Bliley Act (GLB) and the Safeguards Rule protect any private information exchanged by other settlement service providers.
- Mortgage Settlement: At the time of settlement, a loan is often transferred to a second financial institution for loan servicing. The settlement service providers who no longer have a customer relationship with the borrower must safeguard the privacy of the borrower’s information during the period of time that they are required to retain records related to the transaction. The Safeguards Rule establishes the standards for protecting the privacy of the borrower’s personal information. When record retention periods expire and settlement service providers want to dispose of outdated records, they must protect the privacy of the information shown on the records by adhering to the requirements of the Fair and Accurate Credit Transactions Act’s (FACTA) Disposal Rule.
- Loan Servicing: As long as it accepts mortgage payments and provides statements to the borrower, a loan servicer must comply with the provisions of the Gramm-Leach-Bliley Act (GLB Act). The loan servicer must protect the privacy of personal information and comply with the rules that address the sharing of information with affiliated and non-affiliated parties. The loan servicer will also function as a furnisher of information to consumer reporting agencies. When providing information to consumer reporting agencies on the borrower’s payment history, loan servicers must comply with the provisions of the Fair Credit Reporting Act (FCRA).
- Loan Repayment: When a borrower completes payment of a loan and record retention periods expire, the loan servicer must dispose of information in compliance with the Fair and Accurate Credit Transactions Act’s (FACTA) Disposal Rule.
Answer: To remove private mortgage insurance you must be up to date with your monthly payments. And you have to reach the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home.
GREAT info from the CFPB’s original article – here
To remove private mortgage insurance (PMI) that you pay on your mortgage loan, you must be up to date with your monthly payments. These rules apply to mortgages closed on or after July 29, 1999. Federal law generally provides two ways for you to remove PMI from your home loan: canceling PMI or PMI termination.
Request PMI cancellation
The Homeowners Protection Act gives you the right to request that your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you can’t find the disclosure form, contact your lender.
You can also make this request earlier if you have made additional payments to reduce the principal balance of your mortgage to 80 percent of the original value of your home.
There are other important criteria you must meet if you want to cancel PMI on your loan:
- Your request must be in writing.
- You must have a good payment history and be current on your payments.
- Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
- Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the value of the home when you first bought it. If the value of your home has decreased, you may not be able to cancel PMI.
If you meet these requirements your servicer generally must cancel your PMI when you request it.
Automatic PMI termination
Even if you don’t ask your lender to cancel PMI, your lender still must terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. You also need to be current on your payments on the anticipated cancellation date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
It’s worth noting a termination request is different than a cancellation request. Your lender must terminate PMI even if the principal balance of your loan has not actually reached 78 percent of the original value of your home – for example, because the value of your home declined.
Final PMI termination
There is one other important requirement that some homeowners need to be aware of: your lender must terminate PMI if you reach the midpoint of your loan’s amortization schedule before the 78 percent date. The midpoint of your loan’s amortization schedule is halfway through the life of your loan. Most loans are 30-year loans, so the midpoint would occur after 15 years have passed.
Termination of PMI at the loan’s midpoint may occur before reaching 78 percent of the original value of your home for people who have a mortgage with an interest-only period, principal forbearance, or a balloon payment. Keep in mind that you must be current on your monthly payments for termination to occur.
If your loan is guaranteed by the Federal Housing Administration (FHA) or Department ofVeterans Affairs (VA), these rules generally won’t apply. If you have questions about mortgage insurance on an FHA or VA loan, contact your servicer.
If you have lender-paid mortgage insurance, different rules apply.
GREAT words of wisdom from my friends over at KCM – There are some renters that have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either your mortgage or your landlord’s.
As The Joint Center for Housing Studies at Harvard University explains:
“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.
That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”
Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:
“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
The graph below shows the widening gap in net worth between a homeowner and a renter:
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting with home values and interest rates projected to climb.
Great news friends – homebuyers in the DFW metro (and surrounding areas) will see increased purchasing power thanks to FHA’s decision to increase loan limits beginning his January (2016). Previously the max loan amount for Dallas – Fort Worth area was $310,500 which means buyers could buy a $321,750 home by putting the very minimum down. However, as of January 2016 the max loan amount increased to $334,650! This means buyers can buy a $346,787 home with the minimum 3.5% down payment – an increase of $24,900 in purchasing power!! This is GREAT news!
To find out the max loan amount in your specific county follow this link FHA Max Loan Amount Search!
I’ve had several FHA questions lately so I thought I’d include some tips and rules of thumb for you to use as a reference guide. With FHA’s max loan amount increasing and conventional loan credit guidelines still a little tight FHA is becoming more and more popular.
31/43 qualifying ratios (aka Debt-to-Income ratios) – this means that your client’s total monthly payments (those that report to the credit bureaus) + their house payment (PITI) should not exceed 43% of their GROSS monthly income. The first number (31) represents the percentage of their income that the house payment (PITI) alone should not exceed. These guidelines can sometimes be exceeded with an automated-underwriting decision (computer generated approval): Example, the Holmes’s earn $5000 p/mo (total farceJ) before any taxes are withheld. In this case the Holmes’s should keep their total house payment close to $1550 and their total monthly payments (credit cards, auto & boat loans, student loans, etc.) + the total house payment close to $2150. Again, with automated underwriting lenders can typically get outside these ratios….but these are good rules of thumb.
$334,650– this is the max loan amount in the DFW area. Can the sales price be higher than this loan amount?
Yes, absolutely! As long as your client has money to put towards a down payment so that the loan amount is not exceeding the max in your county, the sales price can exceed the max loan amount. For example, you can purchase a $400,000 home with an FHA loan as long you put down enough money to bring the loan amount down to $334,650. This works GREAT for clients that may have a few bumps/bruises on their credit report yet have a stockpile of cash for down payment.
Now, assuming they are putting the very minimum down of 3.5% they’d be able to purchase a home with a sales price of $346,787 with an FHA Loan.
Example – purchase price = $346,000….3.5% down payment = $12,110…..loan amount = $333,890
PLUS, the seller is allowed to pay their closing costs (as long as it’s negotiated)!
PLUS PLUS, the entire down payment can be a gift!!
Go HERE to search your specific county FHA Max Loan Amount Search!
What is the down payment requirement? – FHA requires a minimum 3.5% cash investment. Can this be a gift?
Yes! The entire 3.5% can be a gift!
What are the non-allowables? – What dollar amount should you put in the contract for FHA non-allowables? NONE, ZERO! Those were the old days! The only non-allowable is the tax service fee which is typically less than $80. This can easily be absorbed by a lender.
Is there a minimum credit score? – Most lenders have gone to a 640 credit score requirement. Although FHA does not have a published minimum credit score lenders have noticed a pattern of poor performance with credit scores lower than 580. We will allow for as low as a 600 credit score on our in-house product.
According to Cole, this is GREAT news!
“The fourth quarter RESI found that title agents continue to believe that property valuation issues will be the most likely cause of title order cancellation over the coming year.”
This shouldn’t come as a surprise. In a housing market where supply is very low and demand is very high, home values increase rapidly. One major challenge in such a market is the bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.
Another monthly report by Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation. Here is a chart showing that difference for each month through 2015.
Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. Let’s get together and discuss how this may impact the sale of your home.
Thank you to my friends at KCM for the article – GREAT information!
The Department of Veterans Affairs backed 630,000 mortgages in fiscal year 2013, an all-time high for the benefit program. That record volume punctuates an incredible recent run for VA loans, which have experienced tremendous growth in the wake of the financial collapse.
VA loan volume has soared 372 percent since fiscal year 2007, driven in large part by historically low interest rates and a more restrictive lending environment that made conventional and even FHA financing tough to secure.
In addition to the record volume, the VA made history in 2013 by guaranteeing its 20 millionth mortgage, which went to the surviving spouse of an Iraq War veteran.
The need for higher credit scores and bigger down payments has reinvigorated this home loan program. VA loans have no required down payment and feature more flexible and forgiving requirements.
Despite that flexibility, they’ve had the lowest foreclosure rate of any mortgage on the market for nearly all of the past five years, according to statistics from the Mortgage Bankers Association.