Freddie Mac

Loans for a Niche Market

The New York Times By LISA PREVOST

If interest-only loans were issued too freely before the foreclosure crisis, their availability now is restricted to a privileged few.

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. “Then they take some of that bonus and pay down their mortgage each year,” said David Adamo, the chief executive of Luxury Mortgage in Stamford, Conn. “And their monthly payment then also goes down.”

Thus, interest-only loans have evolved into a financial tool, and no longer a means to affordability.

Freddie Mac stopped backing the loans in 2010 after suffering big losses; as a result, fewer lenders offer them. Those that do 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, “a lot of lenders will want to see assets to cover as many as 24 months’ worth of principal, taxes and insurance payments,” said Richard Pisnoy, a principal of Silver Fin Capital, a brokerage in Great Neck, N.Y.

Interest-only loans are primarily adjustable-rate products with an initial fixed period when only interest is due. Available in 5-, 7- or 10-year terms, they “are generally done for 10 years so there’s no payment shock in the near term,” said Tom Wind, the executive vice president for residential and consumer lending at EverBank, a national lender based in Jacksonville, Fla.

Interest rates are usually an eighth- to a half-percentage point higher than on fully amortized jumbo loans. After the fixed term is up, the mortgage re-amortizes, and both principal and interest are due.

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Loan limits on the rise for FHA, but not for Fannie and Freddie

FHA loans could become the go-to financing option for homebuyers in New York and New Jersey, but with higher fees.  By Kenneth R. Harney

After a year characterized by grumpy partisan gridlock, Congress came up with a Thanksgiving compromise that could change the mortgage choices of buyers and refinancers in more than 660 markets across the country: It raised maximum loan limits for the Federal Housing Administration while leaving loan ceilings untouched for Fannie Mae and Freddie Mac.

In effect, this may make FHA the go-to financing option for borrowers needing loans up to $729,750 — with down payments as low as 3.5 percent — in New York, New Jersey, high-cost areas of California, metropolitan Washington, D.C., and scattered counties in other states, including Massachusetts, Florida and North Carolina. Fannie Mae- and Freddie Mac-eligible loans in those areas, meanwhile, stay capped at $625,500.

Equally important, the new plan raises the FHA ceilings for purchasers in hundreds of more moderately priced markets. In Hartford, Conn., the limit for FHA is now $440,000 — up from $320,850; Fannie and Freddie remain capped at $417,000. Seattle-area buyers’ maximum FHA loan amount jumped to $567,500, while the Fannie Mae-Freddie Mac ceiling remains at $506,000.

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Freddie Mac Raises Bar for Refinancing With Home-Equity Debt

By Jody Shenn – Nov 15, 2011 5:22 PM ET

Nov. 15 (Bloomberg) — Freddie Mac, the government- supported mortgage company, made it harder for some borrowers with second-lien home equity debt to refinance as it released guidelines for its version of the federal Home Affordable Refinance Program.

For a borrower with loan-to-value ratio of less than 80 percent, the McLean, Virginia-based firm will require total housing debt, including second loans, of less than 105 percent of a property’s current values, according to a notice to lenders posted on its website. Previously, there was no cap.

“The rationale is to manage risk better,” Brad German, a spokesman, said in a telephone interview.

President Barack Obama has said he directed Freddie Mac and rival Fannie Mae to expand their HARP programs to help ease the U.S. housing slump and aid consumers. The companies, which were seized by the U.S. in 2008, are detailing the changes today, after they were announced Oct. 24.

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The Going Gets Tougher – Fannie & Freddie Requirements

THOUGH the economy appears to be stabilizing, the market for financing remains tight.

THE MORTGAGE WARS Dr. Stephen Krieger and Dr. Nada Gligorov prevailed over a lender who didn’t like the size of their prospective building’s reserve fund.

By ELIZABETH A. HARRIS

Some people are able to get mortgages without much trouble, but others find the process arduous, mystifying and prolonged. Then there are the buyers who think their financing is secure, only to see it evaporate sometime between the signing of the contract and the closing table.

“Is it a problem? Yes, it’s a problem,” said Dottie Herman, the president of Prudential Douglas Elliman. “When these things fall through, it’s not because people are destitute — they have good incomes. It’s because banks are very, very tough now.”

Banks can be such sticklers that missing just one payment on a bill can result in a thumbs down. Change jobs and expect the microscope. To complicate matters, sometimes it is the buildings themselves, not the buyers, that fail to qualify, thanks to new or newly relevant Fannie Mae and Freddie Mac lending guidelines.

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