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Your FICO score matters!

Okay, driving through Fairfax County I share my thoughts on the essentials of knowing your FICO Score and the importance of getting a credit report  early on in the home buying process. If the FICO Score isn’t 700 720 then there may be ways to improve it… since 720+ is the magic number for availability and good pricing.

So after you have surfed through umpteen home-search web sites late one night, contacting a reputable lender and completing a basic loan application will get the ball rolling! I know some.

Have you been paying you bills on time?

It’s a hard-and-fast rule…

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• Your FICO Score will take a hit from Damage Points (dougfrancis.com)

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Yes, more new mortgage application rules… July 30th!

There are some new guidelines that are being implemented by the Federal Reserve starting July 30^th, 2009 as reported in The Washington Post over the weekend. Any agent who sells homes (listing agents, pay attention) better get familiar with them or your deals may get delayed at a moments notice, or learn the hard way that buyers believe they can walk away at any time.

The idea behind the new guidelines is to protect consumers from last minute “junk-fees” that can materialize at closing. Junk-fees are a common complaint heard by regulators. The protections require lenders to provide consumers with more accurate truth-in-lending estimates, and give consumers a seven day cooling-off period to digest the information or any future changes… so they can pull the plug if necessary.

1. Requires lenders to give applicants the initial disclosures of mortgage costs (truth-in-lending statements) within three business days of loan application.
2. Applicants then have a required seven-day waiting period to review loan documents before closing (so no more last-minute mortgage deals).
3. Lenders may only collect reasonable credit-check fees at loan application.
4. Requires lenders to provide a copy of the appraisal to the applicant three business days before closing.
5. Closings will then depend on the applicant getting the appraisal, except if the applicant waives that requirement.
6. If the applicant has not locked-in a rate and rates go up more than 0.125%, then the lender is required to provide a corrected version of the estimate to the applicant. A new seven day waiting period begins before a closing takes place.

These changes may greatly impact the ability to close a loan or real estate transaction because the additional time periods or contingencies can change the closing date.

Real estate contracts bind buyers and sellers and typically have contingency periods covering many things including financing. With a real estate contract, buyers place money at risk, known as an Earnest Money Deposit, to assure the sellers that they aren’t going to default on the contract. Buyers in Northern Virginia may remove the financing contingency which puts the EMD at further risk, but I foresee future problems when the buyer has removed the financing contingency but the lender does not deliver the appraisal on-time.

When I meet with clients, I always mention that one of my roles as their agent is to help manage the transaction making sure that all parties have the paperwork that they need to complete the transaction. Yes, these new Federal Reserve guidelines are going to force mortgage lenders to be more resposible… but they will create another layer of phone calls and paperwork to ensure the sale is closing on the date specified in the ratified contract.

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No short-term loans as HUD pulls the plug

Well, the Tax Credit loan plan is off the table, and HUD took the memo off the web site too. It seems that someone decided to analyze some potential issues… which should have been done before posting it on the crazy world of the Internet.

I started to read about this new program in a few blog posts over the past few days and then asked a few local loan officers for details. A few l.o.’s had no idea what I was talking about, but another followed up this afternoon with the news about the plug pulling.

Now local mortgage guy John Lam gets a gold star!

Overall, in my professional opinion, it seemed a little too much like a “pay-day” loan to me.

Could my earlier post have played a role? Maybe I need to alert some other sites around the country.

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My insider’s tip to refinancing your mortgage… in Virginia

Saving money is always why people want to start the hassle of refinancing. And with today’s fixed rates around 5%, I get calls and e-mails from past real estate clients with questions about their options all the time. It is nice to be considered their go-to guy when it comes to real estate questions, and now you too shall know the big refinancing secret strategy…  as long as you live in Virginia and are looking at your current mortgage statement.

In Virginia, it is essential that you start with your current lender.

Sure, but Doug, the Internet is full of better looking deals than my lender’s web site, you may be thinking to yourself. That may be true, but the Internet is sometimes filled with people offering too-good-to-be-true deals. Don’t get me started on this topic right now because I will cover that issue later.

Again, in Virginia, if you refinance with the exact same lender then there is a“recordation tax exemption” for the mortgage. In my case, that would be about a $3,000 savings right off the bat! For those of you with a legal background or curiosity, you may reference §58.1-803 (D) of the Code of Virginia.

Bet this sounds like a good idea for those of you looking over those Truth-in-Lending Estimates right now. Everyone loves to skip paying taxes on anything if it is allowed by law, that’s the American way. But watch out for those pitchmen who say they can pull off that exemption because if it isn’t exactly the same lender then you may be going to jail for six months and paying a $1,000 fine. That will screw up your security clearance!

The refinance needs to be with the exact same lender. It has to do with being the same legal entity and subsidiary mortgage companies do not qualify. A “Division” of a bank does qualify. What?

Here are some direct examples from a recent letter from the Clerk of the Fairfax Circuit Court (3/12/09): [document removed from site]

This is the case of Bank of America and Countrywide. According to the 10K that Countrywide filed with the Securities and Exchange Commission, the merger agreement between Bank of America and Countrywide provides for Countrywide to merge with and into a wholly owned subsidiary of Bank of America.A subsidiary is a separate legal entity from the parent company. Therefore, an existing Countrywide loan being refinanced with Bank of America is NOT a refinance with the same lender.

Other examples of transactions that DO NOT qualify for the same lender exemption are:

1. JP Morgan Chase and Chase Home Finance, LLC. (Separate entity). However, we just received a letter from JP Morgan Chase stating that JP Morgan Chase is the actual note holder for deeds of trusts issued by JP Morgan Chase Bank dated on or after January 1, 2005, which are currently being serviced by Chase Home Finance LLC. In those instances the transaction would qualify as a same lender refinance.

2. Wells Fargo Home Mortgage and Prosperity Mortgage which is an affiliate of Wells Fargo Home Mortgage. (Separate entity).

3. Wells Fargo Bank, N.A. is a subsidiary of Wells Fargo & Company. (Separate entity).

4. The payoff statement shows that wired funds are to be sent to X bank for further credit to Y lender. If Y lender is different than the lender providing the refinance loan then it is not a refinance with the same lender. We have found this in Bank of America/Countrywide refinances. The Countrywide payoff statements instruct the settlement agent to wire the funds Bank of America and to further credit MRC. MRC is MMA Realty Capital. They are an investment firm. According to our research, MRC is the current lender, not Countrywide. Countrywide appears to be servicing the loan for MRC. This would not qualify for a refinance with the same lender exemption.

Contrast this with Wells Fargo Home Loan which is a DIVISION (not a separate entity) from Wells Fargo & Company and BB&T Mortgage which is a DIVISION of BB&T Bank. A division is not a separate entity. Transactions in these situations would qualify for the refinance with the same lender exemption.

Why does the Clerk care so much about this issue? Because the Clerk may be personally liable for the uncollected money!

So now you know a little inside secret. If you are starting to look into refinancing then contacting your current lender is a must and absolutely the first call that you should make… and do your homework to make sure it is the same legal entity.