FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

Disclosure, disclosure, disclosure.....   such a hot topic. Why is that?  Well, HUD has decided to make some new changes to the Good Faith Estimate and to the HUD-1. HUD is stating that these are the first changes in over 30 years. HUD goes on to say that this new regulation should save borrowers $700 at the closing table.  Huh?  I don't consider myself to be naive or stupid when it comes to trying to understand the government's thinking. But how do you come up with $700?

Here is my problem with this new regulation. Not only is it more paperwork, that I think it will actually add more confusion, but that HUD is using a lame excuse so late into a problem that should have been corrected a decade ago. Below are the two new changes, please take a look.

• New HUD changes - Good Faith Estimate

• New Settlement Statement (HUD-1)
  

And here is what a current Good Faith Estimate looks like.  Current Good Faith Estimate

Here is why I am up in arms about this. HUD Secretary Steve Preston said, "changes in the housing market and increases in home foreclosures demands action."  I agree to disagree. It's all based on HUD's reasons.

                                                                                                       Cartoon from CartoonStock.com 

Let's take a much closer look at this. RESPA (Real Estate Settlement Procedures Act) was created in 1974. RESPA is a HUD consumer protection statute designed to help homebuyers be better mortgage shoppers, and is enforced by HUD. RESPA was basically designed to keep those in the real estate business from inflating the prices in order to give kickbacks. .

Here is where RESPA is suppose to protect the consumer. RESPA requires that consumers receive disclosures at various times in the transaction.  For more on RESPA, please read : Real Estate Settlement Procedures Act

HUD believes that many of these foreclosures were due to lenders not disclosing correctly. A good example of this is that if I told you that you were getting a 6.5% rate and that it was fixed, but in reality, it was an arm. Another example is if I told you that your rate of 6.00% was with zero points, but when you got to closing, that you ended up being charged 1 point.

So what is my problem?  Regualtion !!! You need to regulate change and not just make changes. You need to enforce them. Sure, many of us go through audits each year. But why was it never truly enforced?  Example...  when I give the borrower a Good Faith Estimate in the beginning, when they make a mortgage application with me, they get a copy of this.  If anything changes on that GFE, the borrower is suppose to be notified and given new disclosures, and sign them.  Rut Row... there is one of the main problems.  This was not done often, nor was this checked in many audits. If you review the new good faith estimate, it says this....

The new HUD-1 settlement sheet will have the same numbers to correspond with the GFE. And if changes are made, the lender has 30 days to return any fees to the borrower.  Okay, this part might not be so bad. But my frustration with all of this is that they should have been harsh with the disclosure issues in the last 20 years. They should have had one sheet with bold writing on it....

“If anything changes from your original good faith estimate… don’t close.  Or, close and report this matter to X,Y, Z. That lender will have 30 days to make any corrections necessary.”

My other issue with this? I have no problem with the true transparency or those shopping for mortgages. My fear though, many consumers might even shop themselves out of a mortgage. Just because a loan officer gives you a good faith estimate and helps you fill out an application, doesn't mean that you will close on that loan. I am not trying to scare anyone out there, but this does happen. It happens more often than you think. But here is what HUD did, they have this included with the new forms.

Now, my question to you....  are we over-regulating?  I just think some of this should have been changed a long time ago and that we are blaming the countless foreclosures on this issue. Did we forget that the economy itself has gone down the toilet?  I do agree with this new proposal.

This is an excerpt from HUD's finale rule. The GFE will be given to borrowers at the time an estimate is provided and will more clearly answer key questions consumers have when applying for a mortgage:

• What's the term of the loan?
• Is the interest rate fixed or can it change?
• Is there a pre-payment penalty should the borrower choose to refinance at a later date?
• Is there a potentially crippling balloon payment?
• What are total closing costs?

My other problem which is talked about in the article below are these so-called "yield spread premiums" which are rarely understood by or fully disclosed to borrowers. Consumers deserve to understand this and they need to get credit for essentially paying these premiums. Again, I think we are adding more confusion to the problem. Those loan officers that don't truly educate their client, will get around this. I can see the explanations being bogus. Just my opinion.

For the whole article, please read :

Remarks by Steve Preston, Secretary of Housing & Urban Developement on the new mortgage rules

So, what do you say?  What do you want?  How about a true professional that gives you more than just numbers, educates you. Maybe I am just angered at this, because I have been properly disclosing since 1992.  And what's funny is that these changes don't go into affect until January 1, 2010.

In my opinion, if we want to regulate and prosecute, how about going after those that falsely advertise interest rates. Please read --  Real Estate professionals, please don't forget about the laws when it comes to mortgage interest rates and payments. This was written by : Kevin & Maryellen Garasky

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Beth Forbes is actually a smart cookie. And what she wrote about below is something that we should seriously think about, especially because all of the foreclosures taking place now. I think this truly would be a good solution to help solve part of this mess. Please read what Beth had to write about.....

Active Rain Gathering Monday December 22 at 12 noon

Note Change in Meeting Place

Famous Daves

181 Jennifer Road

Annapolis, Maryland

phone

410-224-2207

Looking to meet some 'Rainers' that I haven't met as of yet. I am going down to the Eagles / Redskins game Sunday, for anyone that wants to meet to tailgate. The game starts at 4 pm.  If not, I hope to meet many of you on Monday.

Why Annapolis, because I will be staying in the area.  And I figured it is in between Maryland, D.C., and Nothern Virginia.  Besides, the restaurant is right off of HWY 301/50 John Hanson Hwy and is right off route 450.

The bonus Prize :  You get to meet the FHA Expert also.  And even an autograph session.... ;o)

Seriously, it would be great to meet a few others in the area. I know Lewis Poretz and Margaret Rome will be there and I am hoping Patricia Kennedy and Brian Block. It would be great if we could get Lenn Harley, aka Hard Core of Real Estate, to join us also. But that might cost extra. Maybe Margaret Woda also?

If anyone of you have been to a small gathering to meet Active Rain members, they are a lot of fun.

PS.... please e-mail me at  jbelonger@ihmci.com  to let me know if you can attend.   Also, you can leave a comment also. And if you have another place in mind, that could be better for all of us, if we are trying to accomodate those from Maryland, D.C, and Northern Virginia... please don't hesitate to drop a name of a restaurant. We can then make up our minds by Saturday.

thanks, Jeff Belonger aka "the FHA Expert"

Double PS.....   casual dress... business casual. I am coming down Sunday and I am not packing a suit.  LOL

For my past AR gatherings, please read :  (there are more... just looking for them)

Members that I have met from Active Rain :

1. My 1st Active Rain meeting with an AR member..... Rob who?????
2. Lunch with Ravi Shah......
3. West meets East....... a face to face with Jonathan Vetter, loan officer.
4. Active Rain Gathering in Philadelphia - 12/2007  A success
5. Bloggers Connect in NYC - January 2008 - great friends
   

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For more information on FHA loans, please go to this link. : The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags

Copyright © 2008 by Jeff Belonger

  In today's society, we look to each other for advice, for counseling, expert knowledge on a specific subject, etc, etc.  In many cases, we just go to the internet and Google a specific subject and poof, there are many links that appear from different people explaining or expressing different ideas or detailed specifics. But how do we know what is actually right?  How do we know what is fact and what is opinion?

  My point to this is that I have been on several mortgage related sites in the last year and have found some information that is misleading or incorrect. Luckily I am in the mortgage industry. But how would a consumer know? 

  Kelly Sibilsky wrote this blog : Opinions are like belly buttons  A very cute analogy, that talks about opposing view points and such.

  My problem with the internet and many comments in blog posts is that when someone tells you that you are wrong, because they found someone else to agree with them, that should make their opinion or statement correct, making it right.

So it goes back to the fact, should two rights make a wrong??  As many, I love opinions and I especially love a good debate. I love when comments are thought provoking. But when you write a blog that is based on true facts, and someone or more than one come into that blog to attack your blog??  And then call you a liar and make a comment that you are not helping your clients? And then that person making comments comes back and says, "I have been validated."  Okay, so they found someone to agree with them. But that they still can't answer my questions and or prove it with facts. Again, does two wrongs make a right? Who do you agree with then? My advice, read all of the comments then. What's sad is that it happened to me in this blog, FHA loans vs Conventional Loans, a real comparison with 5% down. 

As you can see, people will actually verbally abused you and attacked you. In my case, I kept asking one simple question.... Do you have a large pricing hit to your conventional rates when you have credit scores under 659 and when you are putting 5% down. Not once did they reply to this question. But the funny, yet sad part of it, is that they still attacked me.

What should you do with those comments?  Many would say delete the comments. In my case, I have no problem with these comments, once the reader reads every comment made. If you truly get to understand what took place, what was asked, and who never replied????  That should give you a big indication to what took place and probably allow you to assume that the author of that blog was actually correct. If I am going to debate someone that wrote something and I didn't agree with it, or that I thought their figures were incorrect, I will just debate back with facts.

The problem with this is that too many people confuse opinion with fact. I myself?  I love stats and figures, because this will usually win most debates, as long as the correct figures or stats are being used.

For another piece on comments and possibly something that could open your eyes some, please read : How do you treat your comments?  And my adice when it comes to reading other blogs and or trying to gather information. 

• Research that topic.  Gather your facts from reliable sources.
• If reading a particular person, maybe you should follow them for more than a few months. Maybe 6 months.
  

FYI :  Just because it sounds good doesn't mean that it is correct.

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For more information on FHA loans, please go to this link. : The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags

Copyright © 2008 by Jeff Belonger

Please play this prior to reading this post........ You are a mean one Mr. Grinch

Just the other day, I started to follow up with my past clients, those that have bought about a year ago or two that bought using FHA loans as their financing option.

For many of you that don't know what a FHA Streamline loan is, I will be writing about that next week. I did a post about 8 months ago on this, but guidelines have changed since then.

In any case, it's a very simple process. You can basically do two different types of FHA loans :

• FHA streamline with an appraisal to include all closing costs, as long as the house appraises for more, giving you the room.

• or a FHA streamline no appraisal, which means that you can only finance closing costs up to the original loan amount.

In any case, I finally got a hold of one of my clients that settled on September 28, 2007. I explained to him that this would be a very good time to look into lowering his rate, telling him that I could get him about 5.75%. He informed me that he had refinanced with someone else about 2 months ago. I said, ... "huh?" 

Now, many of us expect people to call us back, when thinking about making a decision such as this, especially if they had a good experience with us. Especially for the fact that I got them into a home after 2 other lenders failed. If anything, just to get a second opinion, especially if they were second guessing their decision, which he did during the process.

In any case, I was not only sad for myself, but sad for him. Here is why... In his neck of the woods, values have dropped for the most part. Which would mean that I could only do the 2nd option, the FHA Streamline with no appraisal. And anything above the old loan amount, he would have to bring cash. What people are going to have about $5,000 in cash to bring to the closing table for a refinance.

Well, here is the story..... he basically had a $219,500 balance and they took his loan back up to $222,450. He originally has a rate of 7.00%. Here is the kicker....  They gave him a new rate of 6.75%.  OUCH !!!  When you do the calculations, the difference would be about $35.00 in savings per month.  But it gets worse... they some how lowered his payment $60 a month. It's physically impossible, because the rate is constant and the new principal is just that, new. Going up in loan amount by $3,000 and only dropping your rate 1/4 percent will not yield you a $60 a month savings. I won't know until I get a copy of his HUD. My guess is that they chopped his property taxes, which means that someone will be raising his payment in the next quarter or so.

But guess what, this lender stole his equity !!!! They made it look like it was a bargain, not costing much and to put a few dollars back into his pocket. It's going to take over 3 years just to save the difference that was added back onto his balance.  A double OUCH....

Conclusion :  If this borrower hadn't done this and if I was able to jump in now, I would have been able to save him about $170 at 5.75%. Now?  There is much difference in 5.75% to 6.25% to get a higher yield spread premium to pay for some of his closing costs, since they ate up his equity. And in this case, Stole his Equity. I might be able to save him $85 more a month, but that's after him possibly bringing an additional $2,600 to the closing table.

The other sad part to this story?  The loan officer said that they could do this again in 6 months. Wait, first off, you could refinance once a day if you really wanted to, even though it would cost money. Secondly, knowing that home values are down, the next time he would do this, he would need to bring a lot of money to the table.... about $5,000.  Lastly, the loan officer said 6 months because this way they are in the clear and would not have to pay back any profit made through the yield spread premium. Think about it... who had whose best interest at heart???

Moral of the story.....  even if you could use a few bucks in savings, think about it again. Even if you don't want to go back to your original loan officer, seek some professional advice from a few others. This kind of mistake could be a lot more costly than just $60 in savings per month.

My Pet Peeve on this…. A refinance for just a  ¼%  in rate??  

-- Any professional loan officer with ethics would know that this is not feasible for the borrower. It still costs money to refinance, no matter how you look at it. This just hurt this particular homeowner, not helped him.

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For more information on FHA loans, please go to this link. : The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags

Copyright © 2008 by Jeff Belonger