The progression of home sales within the housing market is dependent on first time home buyers starting the domino affect. Their home purchases are the catalysts that allow people to sell their existing home and then move into a new property such as a larger home, condo or townhouse. In order to keep the housing market moving forward, we need to encourage homeownership at the beginning of the cycle. Mortgage programs that are underwritten with greater flexibility regarding credit, income and down payment will create more homeowners. We need mortgage loan programs that allow you to buy a home with as little money down as possible.

As recently as March of 2008, there were conventional loans that allowed for 100% financing such as the Home Possible, My Community, and 80/20 combination first and second mortgage programs. Declining property values coupled with high mortgage delinquencies in all real estate markets have all but eliminated investors for these types of high LTV loans. In addition, due to large losses by private mortgage insurance companies (PMI) there is an unwillingness of mortgage insurers to insure these loans. Hence these loan programs have either been eliminated or now require a down payment. With Fannie Mae and Freddie Mac’s current financial problems and the overall state of the mortgage markets, don’t expect that they will be creating any new high loan to value zero down mortgage products anytime soon.

Herein lies the problem. Most first time home buyers lack sufficient resources for the down payment and closing costs. They often have good credit and the ability to make a payment. Until they save enough money, they are left out the housing market. FHA loans currently allow buyers to obtain down payment assistance (DPA) from a relative or from a qualified down payment assistance provider. This means that buyers without enough current resources may be able to obtain enough funds to buy a home today. There are a number of approved down payment assistance providers-some of the largest names are Nehemiah, Genesis, and Ameridream. In a nutshell, these non-profit organizations issue down payment assistance to a prospective home buyer and then collect funds from the seller of a home who has agreed to participate in this program at the time of closing. The non-profit charities charge an administrative fee of between $300 and $500 to facilitate with the assistance of this funding. FHA sometimes refers to this arrangement as seller funded down payment-which they don’t allow. Although the funding is coming from a non-profit, the FHA perception is that it is actually from the seller, albeit indirectly. The problem stems from losses. According to FHA, they have experienced larger losses on portfolios of loans that were funded with DPA funds.

In fact, FHA hopes to eliminate these programs altogether through the fast tracked housing bill going through congress now. Time is of the essence! The senate version-which is the supported version-will eliminate DPA. What would this mean? Let me make this clear-if this bill passes fewer houses will be sold. More qualified homeowners will remain as renters. More homes will stay on the market and the real estate and mortgage crisis will get worse. DPA funding offers a solution to our crisis by making homeownership possible. If there are problems with the way things are being done within the current DPA program then let’s work on modifying them. Let’s identify solutions-such as raising the minimum required credit score on DPA funded loans. This would probably lower the defaults and match the underwriting to the risk. Elimination or outright banning of DPA programs that are currently helping our ailing housing market is foolish. As a Minnesota FHA mortgage broker who works in the market on a daily basis, I can tell you about clients who are good people who want to become homeowners. Their shot at owning a home depends on these programs. Get involved and learn more. The consequences of making the wrong decision about the fate of DPA’s will affect our entire economy.

When it comes to mortgages or financing upon the purchase of a property there are many options available according to the buyer’s plans and financial situation. Today we’re going to talk about one of the most controversial types of mortgages out in the market today, the adjustable rate mortgage (ARM).

As the name implies an adjustable rate mortgage is a type of home loan that varies according to several indices; predicting the fluctuation of such indices is impossible. If there are so many conditions and variables for this type of home loan why would a person opt to work with such payment program? — you may ask, the fact of the matter is that ARMs are not the terrible monster most people describe, there are many good reasons why a person may choose to work with an adjustable program instead of a fixed rate loan. The following list will give you some very good reasons about why an ARM can be a smart decision:

– Low initial payments
– Affordable terms for new property buyers
– Convenient terms for investors

An adjustable home loan will always provide a lower payment when compared to a fixed rate loan, new homebuyers will normally feel attracted to this type of program if they are making plans of saving money whilst they have low payments and a fixed term and will refinance once the fixed term is up.

Sometimes a person may not qualify for a fixed rate loan because of the FICO score, if a fixed program was to be put together for a person with a less than perfect score the payments will not be affordable, so while the payments are fixed they will be so high that homebuyers will have no choice but to go towards the adjustable route.

Property owners who do not plan to stay in their residence for more than a couple of years can save money on mortgage payments if they opt to get an adjustable program which often has a fixed period with a low monthly payments.

When it comes to ARMs is of the utmost importance that the property buyer knows what’s going to happen but what the plans are for the next few years because when a fixed or teaser term is up the monthly payments will adjust accordingly and this change can negatively impact the financial situation of the property owner.

Property Tax Implications

Now that we know that adjustable mortgages are good if they are used in a smart way we must also present the negative side of this type of loan in correlation with the property taxes when a person fails to refinance before the fixed period expires.

Property taxes are set by the local municipality; these taxes may increase without notice and are often calculated according to the value of the property and other factors. If a person holds an ARM until the time it starts to adjust there will be a double whammy effect, is because the property tax can also increase and make the adjustable situation even worse for the homeowner.

In some states, when a home is purchased from a person who owned it for 15 to 20 years the property taxes may double for the new owner when the escrow is recalculated, so waiting for a variable loan to adjust may not be the best idea when we consider that property taxes will also add to the problem.

You will normally be required to key in the following information:

Home loan amount

The most basic and essential question that the mortgage calculator will require from you. Fancy that new property? Type in its value and try to work out the installment. However, the mortgage calculator will not be able to advise you on what is the safe range of deals that you are able to undertake. A mortgage calculator merely gives you the result based on your own assumptions. A mortgage advisor can actually guide you to work out on a safe range of housing loan to undertake based on your personal financial profile.

Loan tenure

Loan tenure refers to how long you would want to pay for your home loan. It can range from 5 years to 35 years. Again, this depends on the profile of the financial consumers. Different banks have different method for calculating the loan tenure for each applicant. Blindly keying the loan tenure into the mortgage calculator can lead you to falsely assume that the bank will allow you that loan tenure. Your mortgage advisor who can be a mortgage broker or a bank officer can advise you on the actual loan tenure allowed for you. They can also provide additional advice on how different loan tenures can affect your financial profile.

Interest rates

This is very simple. Call up a bank and ask for their interest rate then key this piece of information into the calculator. Alternatively you can work with a mortgage broker, and he or she will quote you the best rate from all the banks in your district or country. Remember, interest rates are largely divided into fixed and floating. Mortgage calculators on the web are mostly for fixed rate mortgages. Your mortgage advisor can actually assess your financial and psychological profile and determine if a fixed, floating, interest only or hybrid is suitable for you.

A mortgage calculator is a piece of equipment that has no experience by itself. It can give you indicative results or results that you very much would like to see. A mortgage advisor, on the other hand, deals with many customers on a per day basis and has accumulated vast experiences in dealing with mortgages. He or she can quickly determine your financial needs and assist you in your unique situation. The only probable way a mortgage calculator can beat a mortgage advisor is when that particular calculator has been enhanced with biological artificial intelligence and has been driven through countless of mortgage application situations. Perhaps that will happen in the future, but for now, its better to seek out a mortgage advisor instead.

As of Monday July 14th, 2008, the government has passed new laws which cause a decent amount of change within the mortgage industry and how these companies give out loans to homeowners. Even though they were passed on Monday, these rules wont take effect until October 2009 to give time for companies to transition to the new set of standards.

The concept being birthed in 2007, was in response to the treatment homeowners were facing from mortgage companies and to the foreclosure crisis that took place. It has been stated that the basis for these new rules are to protect future home buyers from mortgage companies.

The Foreclosure Crisis
Within the late 2006, the housing industry felt a large blow when a mass amount of foreclosures occurred due to rates on mortgages and also because of the fact that many of the new loans were made to individuals with either bad credit or too low of an income.

Experts believe that the basis for so many of these home loans being in place was the fact that many homeowners thought they could reap benefits when refinancing later on. Even though, their ideology failed because with the interest rates reset higher, refinancing was hard to come by which led to approximately a million foreclosures.

Mortgage lenders, banks and other financial institutions felt the impact dramatically reporting 100′s of billion dollars in losses. Not only was the housing industry devastated, but the US economy in a whole was also rocked by the housing crisis. These issues led to the US Federal Reserve cutting down interest rates and to the creation of the economic stimulus package which was passed by the government in 2008 to help offset debt and to spur on economic growth and instill belief in the US economy.

The Economic Stimulus Package
The Economic Stimulus Package of 2008 was passed in order to restore good faith within the economy. Its main purpose was to provide assistance to low and middle income citizens. From the economic stimulus package, all recipients were set to receive at least $300 and an extra $300 per dependent under the age of 17. The maximum pay that a person would receive would be no more that $600. Any individuals with an annual income over $75,000 would not receive any monetary funds except for those who had qualifying children.

In addition to citizens, the law also applied to businesses offered them certain tax incentives. Those include tax deductions on eqiupment meant to improve ones business and an increase in how much a business can deduct in business expenses.

In an article by James Temple from SF Gate he lists several key changes in mortgage practices that was just passed on Monday.

General Mortgage Rules:
- Prohibit creditors and mortgage brokers from coercing appraisers into misstating a home’s value.
- Require additional information about rates, monthly payments and other loan features in all advertising.
- Ban seven deceptive or misleading advertising practices, including calling a rate or payment “fixed” when it can change.

Lending Rules For Higher Priced Subprime Loans:
- Force lenders to consider a borrower’s ability to repay loans from income and assets other than the home’s value.
- Require lenders to document a borrower’s income and assets.
- Ban penalties for borrowers who pay off loans early, if the payment can change in the first four years. In certain cases, a prepayment penalty period can’t exceed two years.
- Mandate that creditors ensure certain borrowers set aside money to pay for property taxes and insurance, by establishing escrow accounts.

In reference to the new mortgage rules, many claim that these rules will assist many homeowners and aspiring homeowners from companies that prey on them to make a profit despite the views on their practices are questionable. Yet with this belief intact, many individuals still hold firm in their opinion that these rules are just a tip of the iceberg and much more needs to be done within the housing industry and in relation to some of the illegal practices carried on by some of the lending companies.

Only rarely you will find an individual make a full purchase on a home. A vast majority of people who resort to borrowing when buying a house, normally rely on a term known as mortgage.

The mortgage economy is huge, with different lenders and different mortgage types; it can be difficult for first-time homebuyers to select a product. However with the help of the Internet, reading and physically trying new things to help get around a mortgage deal could not become easier.

Bank and building societies are the usual places where you could turn to if you required a loan or mortgage. Numerous financial building societies are also in fact offering mortgage deals.

6-steps to a successful mortgage deal

1. Make sure you understand your financial status and any other circumstances first. Being employed or self-employed can reflect the type of mortgage you are legible to.

2. Get online and learn the terms and how mortgages operate, this will create an understanding and give you an indication of what best suits your requirements.

3. It can be a good idea to work with lenders who has a good track record. Try to set up a meeting with the company. Try to contact a reliable lender and speak about what you want to do. To obtain additional information, set an appointment and ask any questions you feel you do not understand.

Analyse the lender’s policy, particularly on interest rates and down payments. Once you have met potential lenders, start comparing the differences, such as interest rates, down payments, period of time, and loan amounts.

4. Jump on the internet, choose one of the three search engines, Google, yahoo, or MSN, and compare mortgages.

5. Once you have a rough idea of what is involved and what it might take to obtain a mortgage deal, inspect any penalties that can be brought forward. There may be rules that you might find hard to comply with.

6. The most important factor to consider when searching for a mortgage deal is the interest rates, down payments, and penalties involved.

Many people complain about mortgage insurance costs and how it turns mortgage payments too expensive. Few people know what mortgage insurance is and what it protects you from. It is not that people would stop complaining if they knew but at least they would try and find a suitable insurance company providing a balanced solution in terms of coverage and price.

Since the insurance market is highly competitive it is possible to obtain both a complete coverage and an affordable price. You just need to shop around and do not go for the first offer you receive. You may want to search on your own instead of hiring a broker but always remember that it is possible to obtain high quality mortgage insurance for a reasonable price.

Mortgage Insurance Concept

One of the main risks of mortgages is that if you fail to repay the loan which is secured by your property, then the property can be lost to repossession or foreclosure. Someone may be incapable of affording the mortgage monthly payments due to illness or unemployment. Mortgage insurance is meant to protect the insured from losing the property due to the above reasons or other by providing the funds needed to keep up with the monthly payments.

Usually, mortgage insurance starts payments immediately after the claim is processed and even if the claim is accepted some time after the illness started, the accident occurred or the lose of employment happened, insurance will cover for any previous payments that should have been made immediately after the claim was made so as to avoid damage to the insured’s credit.

Importance Of Retroactivity

Retroactivity of payments is a very important issue. If for any reason your mortgage insurance does not pay a due mortgage payment, there are many legal consequences that can affect your right to the property and your credit. Therefore you should check your policy to see which the requirements for filing a claim are and make sure to file it as soon as the event depriving you of your income occurs (illness, accident or unemployment).

Failure to do so can let the insurance company pay only for the mortgage payments due after your claim was filed and therefore you may have to pay the previous due and unpaid ones out of your pocket with your own savings if you have them. Or worse, the payment can be left unpaid affecting your credit and risking your property.

Obtaining A Cheap Mortgage Insurance Deal

Mortgage insurance does not necessarily have to be expensive. Truth is that since the insurance industry is extremely competitive, if you take your time to decide which insurer and which policy is best for you, you can get a great deal.

The best way to obtain a cheap mortgage insurance policy is to search around for different insurance companies and request quotes to analyze the offers. You can also hire an insurance broker which can do the job for you saving you the time and effort needed to achieve your goal: Obtaining an Inexpensive Mortgage Insurance.

Here are some reactions that occurred in anticipation of the President signing this new bill.

Arizona Requires Loan Originator Licensing

On July 7 Arizona’s Governor signed two bills, S.B. 1028 and S.B. 1029. These bills will require the licensure of loan originators and amend renewal dates for existing Mortgage Banker and Mortgage Broker licensees. S.B. 1028 sets forth education and exam requirements necessary to license loan originators. The bill does requires loan originators to become licensed by January 1, 2010. S.B. 1029 establishes an annual renewal date of December 31^st for Mortgage Banker and Mortgage Broker licensees.

Pennsylvania Licensing

Pennsylvania has finally decided to join the nationwide mortgage licensing system. They have already started using the new MU forms and will likely start using the NMLS by next year.

New Hampshire Requires Loan Originator Licensing

On July 9, New Hampshire Governor signed H.B. 1286, which requires loan originators to be licensed. Loan Originators will be required to be licensed by April 1, 2009.

Delaware Authorizes Participation in Multi-State Automated Licensing System

Delaware has finally decided to join the nationwide mortgage licensing system. They will likely start using the NMLS by next year.

New Hampshire Passes Mortgage Servicing Companies Act

Mortgage Servicing Companies are required to be licensed in New Hampshire by January 1, 2009 if they service 2^nd mortgages.

Nationwide Mortgage Licensing System – Periodic Update

Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) have launched a nationwide licensing system for the residential mortgage industry that will enhance consumer protection and streamline the licensing process for regulators and industry. Below is an update on issues related to this system.

• NMLS Half Year Operations Update
• Twenty state agencies to be using NMLS by the end of 2008
• Statement of Intent – 43 state agencies signed on!
• SRR seeks comment on Uniform Annual Report Questions
• NMLS Web Cast Training

NMLS Half-Year Operations Update

The Nationwide Mortgage Licensing System (NMLS) has completed 6 months of operations successfully. Events of note in the first quarter:

• Fourteen states are now participating on NMLS:
  • Idaho Department of Finance
  • Iowa Division of Banking
  • Kentucky Office of Financial Institutions
  • Massachusetts Division of Banks
  • Nebraska Department of Banking and Finance
  • New York State Banking Department
  • Rhode Island Department of Business Regulation
  • Connecticut Department of Banking
  • Louisiana Officer of Financial Institutions
  • Mississippi Department of Banking & Consumer Finance
  • New Hampshire State Banking Department
  • North Carolina Office of Commissioner of Banks
  • Vermont Department of Banking, Insurance, Securities, and Health Care Administrations
  • Washington Department of Financial Institutions
• States are finding that approximately 75 – 80% of existing company licensees are transitioning onto NMLS.
• NMLS has processed 71,740 filings
• 6,112 companies, 4,648 branches and 22,868 loan officers have a record in NMLS
• The NMLS Call Center has fielded over 38,000 calls with an average wait time of only 40 seconds.
• The NMLS website receives an average of 7,600 visits per week.

Twenty state agencies to be using NMLS by the end of 2008

The following state agencies are scheduled to begin participating in NMLS in Fall 2008, bringing the total to 20 state agencies on NMLS.

NOTE: THE FOLLOWING DATES ARE FOR PLANNING PURPOSES ONLY AND ARE NOT OFFICIAL. OFFICIAL NOTIFICATION WILL BE ISSUED TO EACH LICENSEE BY EACH STATE AGENCY AND POSTED ON EACH AGENCY’S WEBSITE.

• Arkansas Securities Department
• Indiana Department of Financial Institutions
• Indiana Secretary of State
• Michigan Office of Financial and Insurance Regulation
• Pennsylvania Department of Banking
• Wyoming Division of Banking

Statement of Intent – 43 state agencies signed on!

The South Carolina Department of Consumer Affairs signed onto the Statement of Intent, bringing the total number of state agencies committed to come onto the Nationwide Mortgage Licensing System to 43.

SRR seeks comment on Uniform Annual Report Questions

The State Regulatory Registry LLC (SRR) has issued a request for comments on the questions developed by the Residential Mortgage Regulatory Taskforce (RMRT) as part of the NMLS Uniform Annual Report. Full information on the NMLS Uniform Annual Report will be provided in the coming months. SRR is specifically seeking comments on the questions that are intended to be a part of this report.

The questions and directions as to how to provide comment can be found on the NMLS Website

The deadline for submission of comments is August 11, 2008.

NMLS Webinar Training Workshops

NMLS is conducting several audio-visual training workshops for companies that wish to learn about the system and gain insight into effectively managing their record in NMLS. Participants will learn how to create an account, complete application forms and manage workflow.

Making mortgage rates predictions is a little tricky. Financial markets, including those which set share prices and mortgage interest rates, are chaotic systems. This is not to say they are chaotic in the common usage of the term, meaning something with no order to it at all, but they are chaotic in the mathematical sense, in that the formulas which describe how mortgage interest rates are determined, which are the formulas used to make mortgage rates predictions, have self-referential components.

Making mortgage interest rates predictions is like making weather predictions – it is impossible to be precisely accurate with mortgage interest rates predictions, and the further in advance you try to predict mortgage interest rates, the greater the margin of error in the prediction.

On the other hand, chaotic systems are predictable in broad terms.

If you think about predicting the weather, you may not be able to predict the top temperature for a given day in August, but you can reasonably sure it will be within a certain range – say, if you live in Orlando, between 80 and 95 degrees F, and if you live in Copenhagen, between 16 and 25 degrees C.

Just as climate gives a broad indicator of summer top temperatures, economic climate gives a broad indicator of mortgage interest rates.

Factors Which Make Mortgage Rates Rise: Inflation

So called “real interest rates”, the interest rates which move in response to supply and demand in the financial markets, are independent of inflation. To get from the “real interest rate” to the “nominal interest rate”, which is what your bank will charge you for your mortgage, you simply add on the annualised percentage rate of inflation.

Factors Which Make Mortgage Rates Rise: Reduced Availability Of Credit

Financial markets operate on supply and demand. If there is a limited supply of anything, then it will go to those who are willing or able to pay more for it. The same is true of mortgage money. Mortgage rates predictions will take into account whether the supply of money is increasing or decreasing, and likewise, the trends in demand for money.

Factors Which Make Mortgage Rates Predictions Rise: Increased Risk

Apart from the underlying real interest rate determined by the broader economy, the rate of inflation, and the supply of money available for mortgage lending, there is another factor which comes into play in any investment decision – risk. Mortgage rates in general will depend on the overall risk involved in the housing market.

If house values plummet, as they have in some parts of the US, then the default risk for the banks suddenly increases, which means that they will be wanting to charge higher mortgage interest rates; predictions will take this upward pressure into account.

Factors Which Make Mortgage Rates Predictions Fall: Government Intervention

The US Government is an 800-pound gorilla in the financial markets. By issuing Treasury bonds at different interest rates, the government can influence the overall market for money, and thus affect the “real” interest rate.

Mortgage rates predictions based on purely economic considerations might indicate that mortgage interest rates are due to rise, but while the political pressure is running high, and in an election year, the government will do everything in its power, however economically irresponsible in the long term, to push the interest rate rises off until after the November elections. Mortgage rates predictions must take this political distortion of the financial markets into account.

Some background: last Tuesday Cox invoked the emergency powers, which were set to take this past Monday, to change the requirements for short sales of Freddie and Fannie stock as well as that of Lehman Brothers, Goldman Sachs, Merrill Lynch, Morgan Stanley, Bank of America, Citigroup, and 11 other companies’ including ten European and Asian financial services companies.

All 19 of the companies have been hard hit in the current bear market but Cox said that the SEC would immediately begin considering rules to extend the new requirements to the rest of the market.

Cox made his announcement in testimony before the Senate Banking Committee.

Short selling is a technique where an investor can sell stock he does not own in anticipation that the price of the stock will drop and he can replace the stock at a lower price, pocketing the difference as profit.

Short selling is a legitimate trading technique but it can contribute to the volatility of the stock market because investors often have to scramble to “cover” short sales if the stock goes up rather than down. Sometimes, if the stock does tumble, investors can be hard pressed to find stock available to make good on the sale. Short selling is often blamed for making the 1929 stock market crash more severe.

Under current SEC rules, short sellers must borrow stock (without actually purchasing it) in order to sell it short. However, there was nothing to preclude the actual owners of the stock from allowing multiple traders to borrow their shares or the same trader to borrow the same shares over and over. When the time comes to cover the short sale such traders are left scrambling.

This so-called “naked” short-selling can add extra downward momentum to a stock because, without being forced to borrow the shares first, traders can short a limitless amount of stock, although short-selling is inherently risky.

Under the proposed emergency rules, traders will be required to borrow the stock pre-short sale, and the owner/lender would have to take it out of the market and not allow other traders to use it to satisfy requirements that they’ve located stock. This past Friday Cox modified the emergency order to eliminate the pre-borrowing requirement for “market makers,” but not the need to deliver the stock within three days.

Wall Street has been asking for reforms in short selling because many believe it is contributing to market volatility and may be being used to manipulate the price of financial stocks. Cox’s emergency action, however, is a short term solution as the order expires in 30 days.

And, according to an article in the Wall Street Journal last week, many financial services companies are complaining that the emergency order does not go far enough.

The American Bankers Association which represents the interest of 8,500 banks said, in a letter to the SEC, that it fears that short sellers will now concentrate their efforts on banks that are not covered by the emergency order and asked that the order be expanded to include stocks of banks and bank holding companies.

The WSJ also reports that the Financial Services Roundtable which represents 100 of the largest U.S. financial companies has asked the SEC to extend that order to cover all financial services companies starting this week. Cox had previously said that those 19 companies on the list were originally picked on the basis of which had access to the Federal Reserve’s lending facilities.

Other companies which have been under selling pressure but did not make the SEC list have also petitioned Cox for inclusion. These include National City Corp., Wachovia Corporation which announced record losses Tuesday morning and Washington Mutual, Inc., which is said to be high on the FDIC’s “watch list.”

But, while some troubled banks are looking for whatever protection the SEC provide, others are concerned that being on the list would further stigmatize them.

Plosser commented that the economy has not changed much in the last few months and that rising prices pose the biggest challenge to the economy. Plosser noted that price pressures are moving through the economy and that the Fed may have no choice but to raise rates.

Plosser acknowledged that financial stability is an important consideration for the economy and that the Fed must take action before price expectations become “unhinged”. Plosser added that the Fed’s credibility must be reinforced by action.

Plosser warned that high inflation expectations will result in firms passing on higher costs to consumers. He warned that a slackening economy does not necessarily contain inflation pressures.

“The U.S. economy is on a road to recovery, but the road will be bumpy,” said Plosser.

Plosser admitted that no one knows if the worst of the credit crisis has passed. He pointed to the recent GSE turmoil stating that the turmoil posed a risk to markets and this made the Fed’s job difficult.