Wall Street Journal – Jumbo loans often come in three sizes: small, medium, and large. The bigger the loan size, the tougher the lending requirements.

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Wall Street Journal – Rising home prices are raising concerns among some housing analysts that prices could again become unaffordable if price gains outpace income growth.

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New York Times – Many major real estate companies offer their own mortgage affiliate, but buyers should not feel pressured to use these in-house loan services.

Making sense of the story

• In-house loan services are not new, but they have gained importance since the market declined. When the lending environment tightened up, the need to have a mortgage broker in house who could give preapprovals that actually worked became important to real estate brokers.

• Relationships between real estate brokers and in-house mortgage brokers can benefit buyers by providing easier access to the loan officer or mortgage broker. This can reduce processing time, and some in-house companies will waive certain fees.

• While using an in-house mortgage service may be beneficial and help to streamline the process, buyers have the right to select any lender they want. Federal law prohibits agents from steering clients to a particular mortgage company or lender, and from accepting payment for referrals.

• It’s important that borrowers do their homework, check all fees, and request the Good Faith Estimate, regardless of which lender they choose.

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The Federal Housing Finance Agency (FHFArecently reported that the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders, used as an index in some adjustable-rate mortgage (ARM) contracts, was 3.43 percent based on loans closed in February. The rate increased 0.08 percent from the previous month.

The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 9 basis points to 3.62 in February. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages.

These results reflect loans closed during the February 22 – Feb. 28 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-January.

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Los Angeles Times – Credit standards appear to be easing, just a bit, according to an analytical study and reports from front-line lenders.

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New York Times – Federal and state regulators are taking a look at the practice in the lending industry of purchasing and billing homeowners for property insurance policies that have lapsed.

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New York Times – During the height of the real estate cycle, many people complained that lenders issued interest-only loans too freely. Their availability now is restricted to a privileged few.

Making sense of the story

• A staple of the jumbo market, interest-only loans continue to be used by affluent borrowers to help them manage irregular cash flow, reap a tax benefit, or free up cash for investment elsewhere.

• In particular, people in the financial services industry who derive most of their compensation from yearly bonuses commonly rely on interest-only loans to keep their mortgage payments manageable the rest of the year. According to one lender, homeowners who use this tactic often take a portion of their annual bonus to pay down the principal amount on their mortgages, which in turn lowers their monthly mortgage payment.

• Because of this pay-down method, interest-only loans have evolved into a financial tool, and no longer a means to affordability.

• Resulting from big losses, Freddie Mac stopped backing interest-only loans in 2010, resulting in fewer lenders offering them. Lenders who still offer them have strict qualifying standards.

• Lenders generally require that the borrower have at least 30 percent equity in a property, and a minimum FICO score of 720. Determination of ability to pay back the loan is based on the fully amortized payment, not the interest-only payment.

• Additionally, most lenders who will extend an interest-only loan to a borrower will want to see assets to cover as many as 24 months’ worth of principal, taxes, and insurance payments.

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Look out for the new market snapshot, it will be released on March 28th by 3:00pm pacific time.

http://www.car.org/marketdata/marketsnapshot/

CNN Money – Borrowing is still relatively cheap, so many potential homeowners may dive into the market.

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Keep Your Home California has launched an easier-to-use website at www.KeepYourHomeCalifornia.org, allowing homeowners to answer questions online and determine if they are a good candidate for the free mortgage assistance program, and, if so, which program works best for them.

The federally funded program helps homeowners who have suffered a financial hardship, such as a job loss, a reduction in pay, divorce, or significant health care expenses, to make their mortgage payments.

The program, administered by the California Housing Finance Agency, can only help homeowners if they meet income requirements and their mortgage servicers participate in the program. More than 100 servicers now participate in the Keep Your Home California, so most mortgages in California are serviced by a participating Keep Your Home California servicer.

The website also includes lists of participating servicers and HUD-approved housing counselors who support the program and can help homeowners in-person.

Homeowners can obtain full details of the four programs:

• Unemployment Mortgage Assistance Program: Homeowners can receive as much as $3,000 per month in mortgage assistance for up to nine months. Homeowners must be currently receiving or approved to receive jobless benefits from the state Employment Development Department.
• Mortgage Reinstatement Assistance Program: Homeowners can receive as much as $25,000 in assistance to help them “catch up” on their past-due mortgage payments. Homeowners must have suffered a financial hardship and be able to make their mortgage payments going forward.
• Principal Reduction Program: Homeowners can get as much as $100,000 in principal reduction. To qualify, the homeowner must have suffered a financial hardship and be able to make their mortgage payments in the future. Also, the current market value of the home must be less than what is owed on the mortgage, that is, “underwater.”
• Transition Assistance Program: Homeowners can collect up to $5,000 to cover relocation costs as part of a servicer-approved short sale or deed-in-lieu of foreclosure of their home.

Homeowners seeking more information about the program should call 888-954-KEEP (5337) between 7 a.m. and 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. The Keep Your Home California counseling center can answer questions in virtually any language, and there is never a charge for services through Keep Your Home California. A Spanish-language version of the website is available at www.ConservaTuCasaCalifornia.org.

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