TAG | mortgage
Changes to the Real Estate Settlement Procedures Act that take effect today require mortgage loan lenders to provide consumers with a standardized Good Faith Estimate that discloses a loan’s key terms and settlement costs. To comply with the new regulations, loan originators must complete a three-page Good Faith Estimate form, providing estimated settlement charges based on the loan’s term, initial interest rate and monthly amount owed. Good Faith Estimates have been used for years, however the new estimate regulates which charges can and cannot change at the time of a loan settlement, thereby preventing loan originators from adjusting certain costs after providing an estimate. Learn more.
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Mortgage Rates Expected to Rise when FED Stops Purchase Program
Comments | Posted by admin in Uncategorized
According to a recent Bloomberg article, Mortgage bonds are poised to slump after a record rally as the Federal Reserve’s unprecedented buying of $1.25 trillion of the securities ends as soon as March, driving up interest rates on new home loans.
Rising mortgage bond yields mean loan rates are likely to end 2010 almost 0.75 percentage point higher than current levels, based on forecasts for government bonds and spreads, adding to challenges for a housing market struggling to recover from its worst slump since the 1930s.
The trend of rising interest rates appears to be gaining momentum. According to a recent Washington Post Article, Freddie Mac sees rates hitting 6% or above in the next year. If you are considering purchasing or refinancing a home and you are on the fence about your interest rate offer, it looks like the time to act is now. With rising rates, waiting to obtain a home mortgage loan could prove to be costly.
Fannie Mae is tightening its underwriting criteria by raising the minimum credit score for automated underwriting (Desktop Underwriter) from 580 to at least 620 for all loans, justified on the grounds that this action “will support prudent risk management and better ensure sustainable homeownership.” Even higher minimum credit scores may apply for both manual and automated underwriting, depending on factors such as the loan-to-value ratio and the number of units in the structure. The minimum credit score applies to all mortgage loans delivered to Fannie Mae, including FHA and other government-backed loans. Fannie is also changing the maximum debt-to-income ratio for Desktop Underwriter to 45 percent, but will allow 50 percent if there are “strong compensating factors.”
The new Desktop Underwriter Version 8.0, including the new underwriting criteria, takes effect the weekend of December 12, 2009. The revised minimum credit scores are already in effect for manual underwriting.
