Residential Mortgage Loan Market and Credit Today

RE47R05

Jody O'Brien

atrakimas@cciaor.comP: 508-957-4317

CEU Outline

HOW MUCH DOES IT COST TO OWN A HOME TODAY?

What is the PI for a 30 year fixed rate at 5.25% for a $350,000 purchase price with a 5% down payment?

Mortgagee –A lender or creditor who is the receiver of a mortgage and to whom a mortgagor gives a mortgage to secure a loan or the performance of an obligation.

Mortgagor – A debtor or borrower who gives a mortgage on his or her property to a mortgagee to secure a loan or assure performance of an obligation.

www.realestatewiki.com

Terms

Due on Sale Clause Acceleration Clause Defeasance Clause Prepayment Penalty

Secondary Mortgage Market

The market where mortgage loans and servicing rights are bought and sold

Mortgage originators mortgage aggregators Most loans are sold Creates equality across geographic locations Ibanez, Eaton, Bevilacqua etc.

Secondary Mortgage Market

Liquid secondary market requires: Standardization – conforming loan Information about performance and risk

Secondary Mortgage Market

The federal government enters the secondary mortgage market in 1934

Fannie Mae Freddie Mac Ginnie Mae

Primary Mortgage Market

Pre-Qualification Pre-Approval

Primary Mortgage Market QM/QRM

QM - A creditor may not make a mortgage loan without first determining that the borrower has a reasonable ability to repay the loan. The Qualified Residential Mortgage is a subset of the QM.

Primary Mortgage Market

QRM determines Risk Retention. Mortgage loans that meet guidelines will be

exempt from risk retention rules. Lenders can sell mortgages on the secondary market without restriction.

Under Dodd-Frank, a lender must hold 5 percent of any loan that isn’t a “qualified residential mortgage” (QRM).

Primary Mortgage Market

Interest Points

Primary loan Market Regulation Z Covers Advertising in the Following Media

Print Radio Television Office Display On Site

Regulation Z Residential Property FHA VA Conventional Loans

Regulation Z Triggers

Monthly payments Term of loan Dollar amount of any finance charge

Sub Prime Loan

Any loan offered at a rate above prime to individuals who do not qualify for prime rate loans

Higher Risk = Higher Interest Strength of sub-prime market dependent on

economy 1-5 (19%) will end in foreclosure Most often ARM

Credit

Credit report contains Public record Credit information Request to view Personal information Statements of dispute

Credit

Credit reporting agencies TransUnion

www.transunion.com Equifax

www.equifax.com Experian

www.experian.com

Credit

Free Report All Massachusetts residents annually

www.annualcreditreport.com Credit, insurance, employment, rental denied Adverse action based on credit report Believe contains inaccuracies

Credit Scores

How important are they?

Credit

Credit Score “Secret Sauce” FICO – Fair Issac Corp

300-850 723 Median score in 2010 640 to get loan 740 to get rate

BEACON - Equifax Fair Issac Risk Model - Experian EMPIRICA - TransUnion VANTAGE – New venture with all three

501- 990 Predictive model Ranked scores from A+ to F

Credit score Late payments Type, number and age of account Total debt Public records Do not consider

Protected class status Age Salary and.....

Certain types of inquires Consumer request Promotional Pre-approved credit offer

www.optoutprescreen.com Account review Employment purposes

FICO Score

New Credit, 10%

Types of Credit in Use, 10%

Payment History, 35%

Amount Owed, 30%

Length of Credit History, 15%

Loan Products AmortizationWhat is the PI for a 30 year fixed rate at 5.25%

for a $350,000 purchase price with a 5% down payment?

$1836.08 What is missing?

Taxes Insurance PMI

Loan Products

Adjustable Rate LIBOR

Negative Amortization FHA

Low cost Smaller down payments Easier qualification Credit score

Loan Products

Veteran Administration – VA loans Government guarantee Now down payment Negotiable interest rate Finance funding fee No PMI Assumable No prepayment penalty

Private Mortgage Insurance Lender requires on loans more than 80%LTV Homeowner's Protection Act – 1999

Cancellation 80 % LTV original purchase price or appraisal No 30 day late payments with in year of

request No 60 day late payment with in two years of

request Lender may require evidence

Automatic Termination 78% LTV Current on loan

Private Mortgage Insurance

Final Termination Mid point of amortization schedule

30 year = 360 payments = 180 Must occur with in 30 days of this date

Fair Lending/Fair HousingProtected ClassesFederal and State

Race Color Religion National Origin Familial Status Handicap Sex

Age Marital Status Veteran History or Military Status Sexual Orientation Children Public/Rental Assistance Sexual Identity Genetic Information

Fair Lending/Fair Housing

Refuse to make a mortgage loan Refuse to provide information regarding

loans Impose different terms or conditions on a

loan, such as different interest rates, points, or fees

Discriminate in appraising property Refuse to purchase a loan or set different

terms or conditions for purchasing a loan

Jody O’BrienPlatinum Real Estate Academy

Committed to Professionalism in Real Estate through Education

Blogwww.reeducator.wordpress.com

Social Mediawww.twitter.com/reeducatorwww.youtube.com/msreeducatorwww.facebook.com/reeducatorwww.linkedin.com/in/reeductor

Thank you for Attending