What Type Of Mortgages Are Still Available?

Well….August 2007 is over.... let us all give a big sigh of relief. Do you realize that you have sat on the “front row” of history this month (whether we wanted to be there or not!)? The lending industry as we knew it 30 days has changed forever (or as long as memory will serve as a boundary). Per www.ml-implode.com, we have lost 144 medium/large retail or wholesale lenders as of today. So what type of mortgages are still available? As of today (and subject to change), read below…..

FHA- Still an awesome loan!

No minimum FICO score- FHA allows “common-sense” decisions.

Maximum loan amount for Dallas, Kaufman, Collin, Denton, Rockwall and Hunt Counties is $200,160 (Sales price of 204,760 with the 2.25 downpayment)

Minimum Down Payment is 2.250%, but can roll in all cost with $0 out of pocket.

Buyer must make a 3% investment unless down payment is paid as a Grant/Charity (DAP) contribution.

Seller can contribute up to 6% of the Sales Price without using a Charity (DAP) contribution.

No Termite Inspection Required.

No Non-Allowables required for the seller.

Buyer can currently be in a Chapter 13 Bankruptcy.

It is an assumable loan (important when rates go to 8% and they are at 6%).

Buyer can have Federal Tax Liens and not have to pay them off!

FHA is now using the standard Fannie Mae appraisal form- No more VC sheets!

(Did you know that we are #4^th Team in the industry for FHA purchase closings last year? Don’t let inexperienced loan officers “practice” on your clients- let us help!)

Freddie/Fannie-

Conforming up to $417,000.

AU (Automatic Underwriting) has tightened significantly.

Lender paid mortgage insurance and/or Buyer/Seller paid mortgage insurance becoming a popular option for borrowers.

Investment Properties up to 90% LTV (10 % down)

$0 Down Mortgage Programs Still Available:

Fannie Mae My Community Mortgage

House America Mortgage

Flex 100

Freddie 100

Freddie Mac Home Possible

Dream Maker Mortgage

Home Run Mortgage

Home Opportunities Program

Expanded Financing Alternatives Program

Emerging Market Programs

80/20 (Note that the criteria for 2^nd liens has tightened significantly)

USDA-

No Down Payment to Qualified Borrowers

No Monthly Mortgage Insurance

Seller can pay UNLIMITED toward closing costs and prepaids!

$0 Move-In Possible for Qualified Borrowers

No Cash Reserve Requirements

Must Purchase in an Eligible Rural Area* (Contact us for the complete list- this is one of our specialty loans!)

VA-

NO Minimum FICO score is required*

There is NO downpayment required!

Seller can pay any/all of reasonable buyer’s closing cost!

Buyer CAN currently be in chapter 13 BANKRUPTCY*

Sales Price can go up to $417,000*

Can have unpaid collections

Can go as low as an 4.20 Fixed Rate if used in conjunction with a Texas Veterans Land Board program.*

*Some limitations apply

VA and TVLB loans are unique- trust them only to loan teams who know them well- we are experts in these- let us help!

Reduced Doc Loans-

This is one of the areas that has had the most changes. A large majority of the “Alt A” market has practically gone away. Stated loans are still available with excellent credit at 5% down and 10% down with FICO scores 620 or above. Stated loans below 600 typically does not exist regardless of downpayment.

Investor Financing-

$417,000 for qualified full doc borrowers w/ 10% down (Freddie/Fannie)

95% investor financing still available for extremely qualified borrowers

Remember the 100% investor financing, stated income loans?…… As Kelly Clarkson sings…. Never Again!

Jumbo Loans-

Earlier in the month rates shot up over night. We are now seeing an improvement to pricing. Loans up to 2,000,000 will require anywhere from 5%-30% down (depending on multiple factors)

2^nd Liens-

80/20 and 75/25 financing is still available, however, minimum FICO scores has increased, as well as requirements for reserves and debt-to-income requirements. This is a very shaky market, so buyer (and seller) beware before closing.

Reminder that PMI is tax deductible as of January 2007 for borrowers making less than $100,000 yearly.

GOOD NEIGHBOR NEXT DOOR PROGRAM

Did you know that HUD has a wonderful program that allows specific clients to purchase a HUD home at 50% of value? Below you will find information on this as well as web links.

Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return they must commit to live in the property for 36 months as their sole residence.

How the Program Works

Eligible Single Family homes located in revitalization areas (http://www.hud.gov/offices/hsg/sfh/revite/abtrevt.cfmare) listed exclusively for sales through the Good Neighbor Next Door Sales program. Properties are available for purchase through the program for five days.

How to Participate in Good Neighbor Next Door

Check the listings for your state (http://www.hud.gov/homes/index.cfm). Follow the instructions to submit interest in purchasing a specific home. If more than one person submits on a single home a selection will be made by random lottery. Buyer must meet the requirements (http://www.hud.gov/offices/hsg/sfh/reo/goodn/particip.cfm) for a law enforcement officer, teacher, firefighter or emergency medical technician and comply with HUD's regulations for the program.

HUD requires that buyer sign a second mortgage and note (http://www.hud.gov/offices/hsg/sfh/nsc/gnndserv.cfm) for the discount amount. No interest or payments are required on this "silent second" provided that they fulfill the three-year occupancy requirement (http://www.hud.gov/offices/hsg/sfh/nsc/gnndserv.cfm).

The number of properties available is limited and the list of available properties changes weekly.

Q&A: Good Neighbor Next Door Sales

Question: What Is the Good Neighbor Next Door (GNND) Sales Program? Answer: HUD wants to strengthen America's communities. The Good Neighbor Next Door Program offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount. Question: Am I Eligible for the GNND Sales Program? Answer: Law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program are eligible to purchase an available home. Question: How Much of a Discount Can I Get on a HUD Home? Answer: You can get a 50 percent discount off the HUD appraised value. For example, if HUD lists a home at $100,000, you can buy it for $50,000 provided, you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your downpayment is only $100 and you may finance (roll in) closing costs. Question: What Kind of Mortgage Financing Do I Need? Answer: You may use FHA, VA, or conventional mortgages, or cash. HUD requires you to sign a Second Mortgage and Note on the discounted amount (which is $50,000 in the example above). No interest or payments are required on this "silent second" mortgage if you live in the home for the entire 36 month occupancy period. You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement. Question: What is the Occupancy Period? You must live in the home as your sole residence for a full 36 months. The purpose of the program is to strengthen communities by encouraging employed, professional law enforcement officers, teachers and firefighters/emergency medical technicians to live in the community. You will have 30, 90 or 180 days to move into the home you purchase, depending on HUD's determination of the condition of the home and the level of repairs that may be required, if any. The 30th, 90th or 180th day is the start date for the occupancy period. Your are released from all obligations under this program at the end of the 36th month following the start date. HUD views the occupancy obligation seriously and vigorously pursues violators to the fullest extent of the law. Question: What Is an FHA Rehabilitation Mortgage and How Can It Help Me Buy a HUD Home? Answer: The FHA 203(k) mortgage program helps homebuyers buy a home and have enough money to rehabilitate or repair it. Repairs must cost more than $5,000. The cost of the repairs and the mortgage are combined into a single monthly payment. Consider FHA’s 203(b) program if needed repairs are under $5,000. FHA also has a new Streamlined 203(k) program which may be useful. Discuss these financing options with your lender! Question: Can I Sell the GNND Home after 3-years and Keep the Profit? Answer: Yes. After you live in the GNND home 3 years, you can sell the home and keep any equity and/or appreciation. Question: Do I Have to Use a Real Estate Broker or Agent to Buy a GNND Home? Answer: Yes. Question: Do I Have to Be a First Time Homebuyer to Take Advantage of the Program? Answer: No. However, you may not own any other residential real property at the time you submit your offer to purchase a home and for one year previous to that date. For example, if you submit an offer to purchase a home on August 1, 2007, you may not have owned a home during the period from July 31, 2006. Question: Where Are These Homes Located? Answer: The HUD homes are located in designated Revitalization Areas. There are hundreds of Revitalization Areas located in the United States. Question: Does HUD Provide a Home Warranty? Answer: No. All GNND homes are sold "as is," without any kind of warranty. Question: Can I Buy Multiple Unit Properties (E.g., Duplexes, Triplexes, Etc.) through the Officer Next Door Program? Answer: No. You can only buy single unit homes, townhouses, and condominiums through the GNND Program. Question: Do I Have to Pay Earnest Money or Other Deposits in Order to Submit a Contract for a GNND Home? Answer: Yes. The amount of the earnest money deposit required is an amount equal to one percent of the list price, but no less than $500 and no more than $2,000. HUD considers all offers to be a commitment to purchase a home if you are awarded the sale. Therefore, please carefully consider your offer and be aware of HUD's policy on earnest money as stated here: If an offer is accepted, the earnest money deposit will be credited to the purchaser at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale. Question: Can I Bargain with HUD on the Price of a GNND Property? Answer: No. You must offer the exact HUD list price when bidding on any GNND property. Then you get a 50 percent discount off of that list price. Question: What if I Leave the employment, that made me eligible, for Any Reason, during the Mandatory 3-year Residency Period? Answer: Nothing happens, but you must continue to live in the home for the full 36-month mandatory occupancy period. If you move out of the GNND home, you will have to repay HUD on a prorated schedule. In addition, you must certify that it is your good faith intention to remain employed as a law enforcement officer, teacher or firefighter/emergency medical technician for one year beginning with your purchase. Do no attempt to participate in the program if you know in advance that you will not be employed as required for at least one year. Question: Some Agencies Have Other Homebuying Programs. Can the GNND Program Work in Conjunction with These? Answer: Yes, as long as you can meet all the GNND program rules while participating in these other programs. Question: What Happens if a Participant Fails to Honor the 3-year Occupancy Requirement? Answer: HUD can demand repayment of the discounted amount on a prorated basis. That means you would have to repay 1/36th of the discount you received for each month that you did not occupy the home. HUD also may initiate administrative sanctions including, but not limited to, barring the officer from participating in any HUD/FHA programs, as well as other federal programs. In any case of fraud or abuse, HUD will refer the case to HUD's Office of the Inspector General for investigation and possible criminal prosecution. HUD may also notify the officer's employing agency. Criminal prosecution and conviction for fraud and abuse concerning the GNND Program can result in a fine of up to $250,000 and/or two years in federal prison. Question: How Does HUD Enforce the 3-year Residency Requirement? Answer: The participant must certify he or she is living in the GNND home as a sole residence at the time of purchase and each year after that. HUD can conduct spot checks to make sure the GNND home is your sole residence at any time during the 3-year period. You also must sign a note and mortgage for the discount amount. HUD may foreclose this mortgage if you do not comply with the 36-month occupancy requirement

Putting a Stop To A Credit Ruse

I've have a lot of discussions over the last couple of months concerning the “Renting” of FICO scores to obtain a mortgage that is credit score driven. I have had multiple phone calls on how the mortgage industry is combating this fraud… and here it is below. The sad part (as in a lot of things), innocent people will be affected.

"Putting a Stop To a Credit Ruse"
By Kenneth R. Harney

The days may be numbered for dozens of Internet-based companies that promise to quickly boost FICO credit scores by 200 to 300 points.

Fair Isaac, the developer of the widely used FICO score, plans to introduce key changes designed to derail schemes that transplant high-quality credit card histories to the files of people with low FICO scores.

The credit-boost companies, easily found on the Web by searching for "credit trade line," claim that they violate no federal laws and are not seeking to defraud mortgage lenders. But mortgage industry groups, federal and state regulators, and credit industry leaders say the programs represent significant threats to the home lending system -- opening the door to fraudulent home loan applications.

Using a FICO-boost service, for example, a mortgage applicant with a history of late and missed payments and a FICO score in the 500s could puff up his or her score well above 700 and be eligible for the best interest rates and fees.

How could that happen? Check out the online pitch of one promoter: "Rent your credit and earn thousands," it proclaims. The company offers cardholders with sterling payment histories on cards with high balances "as much as $10,000 a month or more" simply by accepting unseen borrowers with poor credit backgrounds as "authorized users" on their card accounts for 90 days.

Although the add-on users receive no access to the credit card and cannot rack up charges, Fair Isaac's FICO model allows the cardholders' excellent payment histories to flow directly into the credit files of all authorized users on the card. The addition of the high-quality credit quickly raises the scores of any authorized users -- even though the add-on users may still be poor credit risks.

Authorized users traditionally have been cardholders' children, close relatives or friends with little experience with credit and insufficient histories to generate FICO scores. Many parents allow their high school or college family members to tag on to Visa or MasterCard accounts as authorized users to help them learn about and build their credit skills. But under federal law, there are no limitations on who can become an authorized user or on the number of authorized users. Nor are there bars to treating payment histories as financial commodities and renting them out.

One Web site promoter claims that some cardholder "investors" are "able to accommodate as many as 99" authorized users simultaneously and have "as many as 22 qualifying cards" for rental, creating "thousands of dollars per card" of extra income monthly.

Fair Isaac, worried that its credit scoring system is being gamed to facilitate fraud, is readying a crackdown. Starting in September, the updated version of the FICO software available to lenders -- the "FICO 08" model -- will no longer consider authorized-user accounts in computing credit scores, said Craig Watts, Fair Isaac's public affairs manager.

That, in effect, will block holders of good credit from renting their account histories to authorized users to artificially boost scores. Watts said that once fully implemented, Fair Isaac's change should eliminate much of the problem.

However, some credit experts say there could be a downside: Children and other legitimate authorized users no longer will get the benefits of their sharing of their parents' or grandparents' high-quality credit. Their FICO scores will be depressed or might even disappear.
As an illustration, a college student with little credit history on file might get a 100-point increase by virtue of being an authorized user on her mother's Visa card with perfect payments stretching to the 1980s. Those 100 points, in turn, might lower the student's cost of auto insurance premiums, help in job applications and show her to be a creditworthy potential tenant when she seeks to rent an apartment.

If FICO score calculations ignore all authorized-user accounts, however, the student's score could be 100 points lower.

Terry Clemans, executive director of the National Credit Reporting Association, said that while he understands "Fair Isaac's need to solve the [application fraud] problem, I would think there must be some less drastic ways to filter out" legitimate authorized-user accounts from the new breed of rented credit card accounts. Credit card companies also need to get involved, Clemans said, and "should not approve authorized user accounts" where the cardholder is clearly participating in some form of rental scheme for profit.

Bottom line: If you depend on an authorized-user account to elevate your FICO score -- whether legitimately or with cheating in your heart -- don't bank on it after September.

Lender Market Watch

Last week, Steroid-pumped Stocks kicked sand in the face of the 97-pound weakling Bond market, and home loan rates worsened by about .125% across the board. What happened?

Here's the story - money invested out in the financial markets generally flows back and forth between Stocks and Bonds. This means that when Stocks are doing well, money is flowing out of Bonds as investors move their "safe" holdings into what they hope are winning positions in the Stock market. On the other hand, when the Stock market takes a turn for the worse, money flows right back out of Stocks and right back over into "safe haven" Bonds. This happens over and over, and is true on a large and small scale; from individual investors on up to massive institutional investors...the mindset is exactly the same.

As the Stock market has rocketed higher in recent days, investors want to get in on the action, and that money has to come from somewhere...and that's right, it's coming from Bonds. And when money is pulled out of Bonds, it means that Bond prices worsen, and home loan rates move higher like they did last week.

What should have helped Bonds was a friendly Consumer Price Index report, showing that inflation appears to be moderating. Inflation is the arch-enemy of Bonds, which deliver an investor a fixed return - the value of which is eroded by inflation. But just like the 97-pound weaklings wimpy friend at the beach, the good news on inflation wasn't strong enough to help Bonds or home loan rates regain their legs.

SPEAKING OF THE BEACH...EVER SEE THOSE DUDES GOING AROUND WITH METAL DETECTORS, AND WONDER JUST WHAT THEY'RE UP TO? MIGHT BE SEEKING OLD WAR RELICS, OR PERHAPS A VALUABLE COIN - BUT YOU WON'T NEED A MACHINE TO FIND A NEW COIN THAT'S WORTH ROUGHLY 50 TIMES IT'S FACE VALUE DUE TO A MINT ERROR. IT COULD BE IN YOUR POCKET RIGHT NOW, SO DON'T MISS THIS WEEK'S MORTGAGE MARKET VIEW.

Lender Forecast, May 20-26

What's in store for the week ahead? First, a short - but relevant - history lesson. World War I was sometimes called the "War of the Trenches", because of the unique way that ground battles were fought. A long trench was dug by each opposing force, and they would fight between the two trenches, using the trench itself for cover as needed. Whichever side won that particular battle would advance forward, taking over their opponent's trench and proceeding to fight forward. Now - look at the chart below, and imagine you are in a hot air balloon, looking down over a WWI battlefield. C'mon, use your imagination.

You can see that the 200-day Moving Average has been a very tough "trench" held firmly by the Bond Bulls, who have kept Bond prices above this level for the past nine months running and subsequently, kept home loan rates low. But just this week, the Bond Bears have finally penetrated and defeated this tough trench. And as Bond prices have fallen, home loan rates have risen. And in the past, this particular trench - the 200-day Moving Average - has been a real tough one to beat. In fact, last time Bond prices fell below this level, it took an eighteen month battle to win the trench back, and help home loan rates improve!

This means that the overall trend for home loan rates doesn't look too positive in the coming months, unless some very Bond-friendly news makes its way to the front lines. And with a thin economic calendar in the week ahead - don't expect any significant improvements in the near term.

HAIL TO THE CHEF!

Oops...meant to say "Chief!" Errors are common, but generally not for the US Mint. Because they rarely make a mistake, their recent mishap is causing the value of some newly minted - yet flawed - coins to skyrocket.

The United States is honoring our nations Presidents by issuing Dollar coins, which feature their images. And as a side bonus, the US also saves money, because coins stay in circulation longer than paper currency - yet it remains to be seen if we will adapt to clunky coins instead of paper in our pockets. The new coins will feature four different Presidents each year, appearing in the order in which they served, beginning in 2007 with Washington, Adams, Jefferson, and Madison.

The Dollar coins will be unique in design with each having the name and likeness of the President, the term of office, and a number indicating the order in which the President served. Additionally, the standard inscriptions traditionally found on the face of coins have been moved to the edge. The inscriptions "E Pluribus Unum (out of many, one)", "In God We Trust", the year of minting, and the mint mark have all been moved to the edge of the coin.

And with any big change to design...there is always room for error. Sure enough, some of these new coins will quickly come off the market, because the US Mint made a mistake. The value of these rare coins is now up 5000%, and still climbing.

Here's what happened.

The U. S. Mint placed a significant, but undisclosed, amount of new dollar coins into circulation without the inscriptions around the edge. These $1 coins are now worth $50 a piece to collectors! That's right, fifty times the actual face value. Obviously, something went wrong during the six-step process to allow this to happen.

Here's the procedure:

Blanking - The U.S. Mint buys strips of metal rolled in a coil that are about 13 inches wide and 1,500 feet long. The coil is fed through a blanking press which punches out round disks called blanks.

Annealing, Washing and Drying - The blanks are then heated in an annealing furnace to soften them and then run through a washer and dryer.

Upsetting - The blanks go through an upsetting mill to raise the edges of the coins.

Striking - Coins go to the coining press and they are stamped with the designs and inscriptions.

Inspecting - Press operators use magnifying glasses to spot-check struck coins.

Counting and Bagging - Coins are dropped into bags, sealed shut, and held in a vault until shipped to the Federal Reserve.

Nabbing one of these could turn a tidy profit for you with an even greater price tag in the future. But be careful - The US Mint has issued a warning on their website that scam artists are actually grinding the rims of Presidential $1 Coins to remove the inscriptions, then marketing them as US Mint "error coins".

In Philadelphia or Denver, you can actually take a fascinating tour of a US Mint location. To learn more - or take a virtual tour - click here: Tour the US Mint

Two Major "Did You Knows" about Short Sales.

Important Read!!!

1) Did you know….

That if the seller has an FHA loan , HUD is not allowing lenders to negotiate a short sale and pay closing cost for the buyer. If the lender allows closing cost paid for the buyer, FHA will not cover that part of the cost in the insurability/ reimbursement of the loan back to the lender.

2) Did you know…

The IRS can tax the amount forgiven on a short sale? Read below. For homeowners who are seriously delinquent on their mortgages and hoping for relief, the Internal Revenue Service has bad news: If your lender agrees to modify your loan and forgive any of your debt, you could owe federal income tax on the amount forgiven.

Think of it as the tax code's "kick 'em while they're down" rule. When personal debts are canceled by a creditor, the amount forgiven is treated as ordinary income under the Internal Revenue Code, except in some situations such as insolvency. Worse yet, the lender is required by law to report the canceled amount to the IRS. Ouch!

This is especially bad news for the growing numbers of credit-impaired subprime borrowers who find themselves "upside down" in the current real estate market: They owe more on their mortgage than the value of their house, thanks to noxious combinations of zero down payments, declining property values and hefty payment increases they can't afford.

Diane Thompson, a lawyer with the Land of Lincoln Legal Assistance Foundation in East St. Louis, Ill., tells of one client who learned about the tax code's Catch-22 the hard way. After the homeowner negotiated a loan modification agreement with her lender, she assumed that she was done with the matter. But a year later, the IRS came after her, demanding a large tax payment on the amount the lender forgave -- a tax bill that was equal to her annual income. As required, her lender had dutifully submitted a Form 1099-C to the IRS, alerting the agency to the woman's extra "income" from the loan modification.

The homeowner never received that income in any tangible way; she couldn't deposit it in her bank account. But under federal law, the IRS had every right to come after her for unpaid taxes.
Similar situations are likely to pop up around the country in the coming year as lenders bend over backward to modify thousands of troubled loans to prevent foreclosure. Proposed legislation on Capitol Hill could soften some of the impact on financially stressed homeowners, however. The Mortgage Cancellation Tax Relief Act of 2007 (H.R. 1876) would amend the tax code to exclude debt forgiveness on principal home mortgages from treatment as income.

Introduced in mid-April by Reps. Robert E. Andrews (D-N.J.) and Ron Lewis (R-Ky.), the bill would allow lenders to restructure delinquent mortgages without worrying about income-tax hand grenades hitting their borrowers the next year. The legislation could assist many other homeowners in financial trouble who negotiate pre-foreclosure "short sales" or deeds in lieu of foreclosure, or those whose foreclosure proceeds are insufficient to pay off their mortgage debt.

Short sales are increasingly commonplace. Say you are seriously behind on your mortgage payments, and a loan modification or rate reduction won't solve the problem because you have lost your job. As an alternative to foreclosure, your lender might suggest a quick sale of the house, often to an investor who will buy it as-is at a discounted price. If the short sale proceeds are $10,000 less than the outstanding mortgage balance and your lender agrees to forgive that amount, the Andrews-Lewis bill would allow you to obtain that relief tax-free.

Under current law, your lender would be required to report the $10,000 in phantom income to the IRS. Ditto if you went to foreclosure and the sale proceeds yielded $10,000 -- or $50,000 -- less than the outstanding debt owed to the lender.

Proponents of the debt-relief bill argue that short sales, mortgage delinquencies and foreclosures are painful situations for most homeowners and that there's no public policy purpose served by smacking them with tax penalties that make things even worse. In the case of below-market short sales, for example, most homeowners have already suffered sizable capital losses that are not tax-deductible. They've lost thousands of dollars in equity.

Why pile on?
The outlook for the bill: It's currently before the House Ways and Means Committee, Congress's primary tax legislation body. Because most of the majority-Democratic housing and banking committee leaders have called on banks and mortgage companies to work out solutions to keep troubled homeowners out of foreclosure, a bipartisan tax fairness bill like this one should have a reasonable chance of passage. Stay tuned…..

Lending Forecast, Week of May 7th

This week's economic calendar is front and back-end loaded with potentially high impact reports. Right out of the gates, Monday brings the Personal Income and Spending report with the imbedded Core Personal Consumption Expenditure Index, the Federal Reserve's most favored gauge of inflation. Expectations are for Core Inflation to be reported at 2.2%, inching closer to the Fed's target of 2% or lower. Not to be outdone, Friday is launch-day for the potentially explosive monthly Jobs Report with the latest data on new job formation, hourly earnings, and the unemployment rate. Estimates for new job creations are presently around 100,000.

If either of these reports are out of line - showing more inflation than expected or markedly more jobs than expected - this could cause Bond prices and home loan rates to suffer. And on the flip side - if the reports show low inflation or fewer job creations than anticipated, this could help Bond prices and home loan rates improve.

Mortgage Bonds are now trading within a few whiskers of a very important technical floor of support at the 200-day Moving Average. Why is this floor so important? The chart below shows that Bonds have traded above this floor for eight months - and the last time Bonds traded beneath this level, the 200-day MA became a tough overhead ceiling of resistance, putting a lid on Bond prices or home loan rates improving for one and half years. So...if the news of this week forces the Bond beneath this 200-day MA floor of support, it may mean higher home loan rates for a while.

Lender's Corner

"THE ONE FUNCTION THAT TV NEWS PERFORMS VERY WELL IS THAT WHEN THERE IS NO NEWS - WE GIVE IT TO YOU WITH THE SAME EMPHASIS AS IF THERE WERE." David Brinkley

No kidding...and although the week did start out with little real economic news for talking heads to deliver with drama, the calendar picked up steam in a hurry. Mixed news arrived for both New and Existing Home Sales - and on the heels of the recent strong housing starts and building permits that had the bad-news loving media choking, they attempted to paint a very dismal picture on housing - but it should be taken with a grain of salt. Most closings in March were likely originated in February, which was an incredibly cold month across the US - not the best month to be out home shopping or mucking around construction sites. With spring on the way, there could be some strength in housing in the upcoming months.

This week also brought an interesting report called the Employment Cost Index - one of former Fed Chair Alan Greenspan's favorites - which measures the change in employment costs like wages and benefits. This report showed that costs are increasing, with wages increasing by 3.6% and benefit costs increasing by 3.1% over the past year. So not only are employers having to pay more in salaries due to a tight labor market, but the benefits they are providing to their employees are costing more too.

What's a business owner to do? You got it - consider raising the price of their goods and services to cover the rising costs of their employees...and higher prices means inflation. Not good news for inflation-hating Bond prices and home loan rates, which lost the improvements made earlier in the week and ended unchanged to slightly worse for the week overall.

THE JOB MARKET IS TIGHTENING, AND A COLLEGE EDUCATION IS MORE IMPORTANT THAN EVER - YET 97% OF AMERICAN FAMILIES HAVE NOT PLANNED PROPERLY FOR THEIR CHILD'S COLLEGE FUND. THINK YOU'VE GOT ALL KINDS OF TIME BECAUSE YOUR KIDS ARE YOUNG? WAITING COULD COST YOU...READ THIS WEEK'S MORTGAGE MARKET VIEW FOR A CAUTIONARY TALE OF TWO PARENTS, AND LEARN WHY YOU SHOULD GET STARTED SAVING RIGHT AWAY.

A TALE OF TWO PARENTS...

In today's world, a college education is more important than ever. Many of the jobs that do not require a college degree have been outsourced to workers in other countries, or replaced by a computer or machine. And according to Fed Chairman Ben Bernanke, the income disparity between college grads and non-grads is growing every year. In 1979, college grads earned 38% more than those with only a high school diploma - but today, college grads earn 75% more than those without degrees.

But let's face it, college is expensive, and becoming more so every day, inflating at around 5% per year historically. If anything, the cost will continue to rise as the upcoming high school graduating classes are expected to be the largest in history. The demand for four-year colleges will likely increase and with the number of seats in the classrooms still the same, expansion of space will probably not be an option for colleges and universities, but bumping the price tag certainly will be. And the type of college your child attends can have a big effect on the cost too - for just one year of tuition, room and board, an average private college runs just over $30,000, a public out of state college around $19,000, and even a public in state college is close to $13,000.
So as a parent who wants your child to have the chance to attend college - what can you do? Plan early.

Let's look at a tale of two parents to illustrate how important it is to get started right away.

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it - their kids would be off to college. Taylor's parents are prepared, having recently sat down with a mortgage professional and learning that to completely fund Taylor's four year education at the local college would cost either $300 per month in savings - or by being able to tap into the equity in their home, only $133 per month after tax. "What a relief to know it's all taken care of!" they commented to Max's parents. But Max's parents replied, "Hey, what's the rush? Look, the kids are only knee-high right now...we'll worry about this later."

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max's parents just learned that for him to attend the very same college as Taylor, it will now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor's parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow - but it's twice as much per month as Taylor's parents, who planned ahead and started earlier.

The moral to this story?

If you want to save for a college education for your child, start the investment early. And encourage your children to invest and save too, with a portion of funds from their allowance or a side job like mowing the neighbors' lawn or babysitting. They will see how the value of their savings grows over time, and most importantly, will help instill the importance and value of a college education to your child. And as the college years approach, explore scholarships, financial aid, or federal direct aid, which is money that does not have to be repaid. When your child is young - you just don't know if they will be a star athlete or straight A student - so always better to plan ahead, and if scholarship money does become available, what a wonderful problem to have more than enough money in savings, due to your good planning.

The scoop on AMT (Alternative Minimum Tax)

Remember the old tag line from the show "Lifestyles of the Rich and Famous", as Robin Leach wished us all "champagne wishes and caviar dreams"? And sure enough, these days more and more people have the trappings of the rich. But is it the new home, maybe a shiny BMW, or more vacations? No. It's getting hit by the AMT or Alternative Minimum Tax, originally designed to hit only the ultra-wealthy. Not really the "you have arrived" feeling you had hoped for.

The nasty AMT isn't just for the wealthy anymore, as it is trapping an alarming amount of the middle class, especially those who own homes and live in states with high income tax rates. And it's getting worse. Pretty soon, over half those with incomes between $75k - $100k will be victimized by the AMT.

So what's the scoop with AMT, and what do we need to watch out for?

The AMT was first enacted nearly 40 years ago to ensure that wealthy taxpayers pay at least some federal income tax versus sheltering their entire income with big write-offs. This strategy worked at the time, but AMT has never been indexed for inflation, resulting in more middle-income taxpayers owing the additional tax.

All of us go through the AMT test each year. Our income is matched up with the tax brackets it falls into and the tax owed is calculated. But we also go through a second calculation - The AMT calculation. Many deductions are eliminated and the tax brackets are reduced. The tax owed under AMT is then compared to the tax owed under the bracket calculation. And guess which one you owe? The higher tax, of course.

More individuals will pay the higher AMT tax since it does not allow deductions such as certain interest on some home loans, property taxes, state and local income taxes, standard deductions, or personal exemptions for children and dependents that are normally deductible under the regular tax brackets. As stated earlier, certain interest on some home loans will be wiped out under the AMT. There are two types of home loans that can be eligible for tax deductibility.

First, there is Acquisition Debt, which allows interest to be deductible on a loan used to acquire or improve your primary or second home, with a loan limit of $1 million dollars. The good news about Acquisition Debt is that it remains deductible, even if you are subject to AMT. This makes Acquisition Debt very valuable. But once you pay off or reduce the balance of your Acquisition Debt, it is gone and only the interest on the remaining portion is deductible. So taking out a new loan at a higher amount will not give you that precious Acquisition Debt back.

The next best thing to Acquisition Debt is Home Equity Debt. Home Equity Debt has a limit of $100,000, which can be used over and above the Acquisition Debt Balance. And Home Equity Debt is flexible in that you can pay it down and pull it back out, which is not allowable for Acquisition Debt. But Home Equity Debt is eliminated under AMT...ouch. And with so many people being trapped by the AMT and also having loan amounts higher than what was used to acquire the property, the lost deduction is significant.

"ANYTHING THAT BEGINS WITH 'I DON'T KNOW HOW TO TELL YOU THIS' IS NEVER GOOD NEWS"

After a trend of gradually worsening over the past month, Bond prices and home loan rates finally got the good news they'd been waiting for...that pesky inflation rate finally appears to be moving lower. Early last week, the Consumer Price Index (CPI) showed core consumer price inflation as better than anticipated, falling to a year-over-year 2.5% rate, down from 2.7% reported last month. While lower prices on goods and services are certainly good news for all of us, the consumers; it was especially welcome for inflation-hating Bonds and home loan rates.

Following the news, home loan rates improved by .125%, and appeared destined to improve even more.

But this wasn't to be - what happened? Bond prices were feeling the love, home loan rates were improving - but right in the middle of the party, Bonds ran dead into a tough ceiling of technical resistance, stopping them cold and turning them back, causing them to lose some of the nice ground they'd made in the first part of the week. The path of least resistance ahead appears to be that Bond prices and home loan rates may worsen before they get better...but it all depends on the flavor of the news ahead.

Things to consider when buying a home using FHA loans.

Maximum loan amount for Dallas, Kaufman, Collin, Denton, Rockwall and Hunt Counties is $200,160 (Sales price of 204,760 with the 2.25 downpayment)

Minimum Down Payment is 2.250% Buyer must make a 3% investment unless down payment is paid as a Grant/Charity (DAP) contribution.

Seller can contribute up to 6% of the Sales Price without using a Charity (DAP) contribution.

No Termite Inspection Required.

No Non-Allowables required for the seller.

FHA is now using the standard Fannie Mae appraisal form- No more VC sheets!

Any contributions that the seller is contributing should be included in 12A1B on your contract UNLESS they are using a Down Payment Assistance Program (DAP).

If any monies are being paid as a contribution towards buyer’s down payment, DO NOT include those fees in 12A1B . Instead, add that to your “Special Provisions” #11. You will need to verify with your mortgage lender the amount of the contribution to be specified. Special Provisions to read “Seller to contribute $____ towards a Down Payment Assistance Program”.

FHA Mortgage Insurance is paid upfront (1.50%) rolled into the mortgage amount and .5% paid monthly in the payment. The .5% can be cancelled once the buyer has a 78% LTV and a minimum of 5 years (which ever is the later) has been paid towards the mortgage and the mortgage history has been satisfactory.

A 30 year Fixed Rate mortgage for a Single Family Residence is a Section 203B. A Condo has a 234C Section (the section is a part of The Third Party Financing Addendum #C for FHA).

A Condo does not require upfront FHA Insurance added to the mortgage and a survey is not required. A Condo must meet the FHA guidelines of no less than 51% Owner Occupied and be an FHA Approved complex.

Make sure the executed date is on the contract.

THIS BLOG IS HEREBY CERTIFIED AS BEING 100% "IMUS FREE"

But just in case you didn't get enough of the Don Imus story that seemed to infiltrate every minute of news time last week...just turn on the television or radio for 30 seconds and you're sure to catch an update. The market had a busy week on its own...and the Fed took center stage, with the "Minutes" from the last Fed meeting being released, as well as several members out and about on the speaking circuit.

While the Fed speakers didn't give any market-rattling comments, the Fed Meeting Minutes were a different story. Remember that the Minutes are the "Fed Unplugged", giving all the commentary between voting and non-voting members, before the carefully crafted formal Policy Statement is released to the public. The Fed intentionally delays the release of the Minutes, so the market has time to interpret and adapt to the Policy Statement itself, before they throw the "off the record" discussion into the mix for review and analysis.

The Minutes revealed that although the decision at the meeting was to leave the Fed Funds Rate unchanged, Fed members remain concerned about inflation, as recent indicators show that inflation is stubbornly remaining at a level above the Fed's comfort zone of 1 - 2%. Bonds didn't like the inflationary concerns, and lost some ground...with home loan rates worsening just slightly. The Fed is leaving an open door for more hikes ahead - as well as the possibility of cuts - completely dependent on what the incoming economic data tells them in the coming months. And a highly watched measure of inflation is due out next week - read on to know what to be looking for.

PLEASE MISTER POSTMAN, LOOK AND SEE...IF THERE'S A LETTER, A LETTER FOR ME...

Perhaps the reason neither the Beatles nor the Marvelettes hadn't received that important letter was simply incorrect postage. And with the postage increases that seem to come more and more frequently, it's not a crazy assumption to make. So here it comes again - starting May 14th, new higher postal rates will go into effect. If you don't want your loved ones - not to mention your creditors - waiting by the mailbox, now is the time to prepare.

The cost of postage for a standard one ounce first class letter is increasing from 39 cents up to 41 cents. And you know the drill - each time the post office bumps up the rates by a penny or two, it requires an annoying trip to the post office to purchase a book of one or two cent stamps.

But now - you can wave goodbye to those pesky one and two cent stamps that clutter up your desk or your wallet...the post office has finally created a stamp that will last "FOREVER".

The new stamp is called the "Forever" stamp and was created to do just what the title states....last forever. Once the stamp is purchased, the stamp can be used forever to mail one-ounce First-Class letters anytime in the future regardless of postage increases. The current price of each Forever stamp is 41 cents, and you can buy Forever stamps at that rate until the next postage increase. When the postal rates increase in the future, new Forever stamps sold at that time will go up in price too - but you can use up all your previously purchased Forever stamps without having to deal with buying and using the inconvenient make-up stamps for the difference. Forever stamps can now be purchased online at http://www.usps.com/ or at post offices nationwide.