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Thursday, January 22, 2015

Mortgage Lending Gets More Challenging All the Time; Here’s the Latest

[Published Jan. 22, 2015, in the Jeffco editions of the Denver Post's YourHub section and in four Jefferson County weekly newspapers]

I don’t envy mortgage brokers their work. No wonder so many of them have left the business!  As a real estate broker, I only have to deal with rule changes and new forms every year or two.  The poor mortgage broker has new rules, guidelines and rates coming at him or her every hour of every day!

There are FHA, conventional, CHFA, HUD, VA and other loans and new underwriting guidelines for each of them which can change at any time, with or without notice.  If the loan officer or underwriter fails to follow each guideline or rule precisely, not only will the loan not be funded, but if the mistake is caught in a post-closing review, Fannie Mae or Freddie Mac could make the mortgage company which wrote the loan buy it back.  This can put a mortgage company out of business very quickly, because mortgage companies must sell their loans to Fannie, Freddie or someone else so that they will have the cash to fund future loans.  If several loans have to be bought back because of underwriting errors, the mortgage company quickly runs out of working capital and closes up shop. This has happened too often.
One of our trusted lenders, Bruce Gustafson of Crestline Mortgage (303-596-0780), spent an hour this week going over some recent mortgage lending developments at our weekly meeting.  There’s only room to share some of what he taught us.
1) Denver has renewed funding for its Mortgage Credit Certificate (MCC) program which allows buyers with income under $93,360 to get 30% of their mortgage interest refunded to them on their tax returns (up to $2,000 per year) for the life of their mortgage loan. It’s expected that the statewide MCC program will be funded again by the end of March.
2) Starting April 1st, buyers with deferred student debt will have their debt-to-income ratios — so important in qualifying for a mortgage — recalculated to include 1% of their loan balance each month, which can make them unable to purchase a home. If you have student debt and can qualify for a conventional loan instead of FHA, get under contract and apply for your loan before April 2nd.  With FHA, a similar rule goes into effect in June.  Ask your loan officer for details.
3) The Colorado Housing Finance Authority (CHFA) has long offered buyers the ability to put down only $1,000 to buy a house by writing a second mortgage to go along with an FHA or conventional loan, but starting Feb. 2nd, they will change that second mortgage to an outright grant that does not have to be repaid!  Again, ask Bruce or another CHFA-certified lender for details.
This just skims the surface of what Bruce shared this week, so perhaps you can see why being a loan officer can’t be second or part-time job!  I’m glad I’m a Realtor, not a loan officer!


  1. . Some changes that are more Important to your business, and saving money for your clients are the change in monthly MIP on the 26th, for FHA clients to .8-.85% (dependent on LTV) from their current MIP which makes FHA significantly more competitive than either the 3% down FTHB FNMA program or another to be released in Mar. by Freddie.

    Past FHA clients can save money by a streamline stated income no appraisal refinance allowing them to save at least .5% on their current MIP, (6 months payments required and some restrictions may apply) and since rates are at a more than 80 week low (Friday being the fourth lowest day in that time frame, bested only by 3 rates last week), also on rate, that translates to immediate savings with lower payments (and potentially no cost for refiers as it can be factored into the loan). This allows many to qualify for more house / save money on their mortgage payments now for buyers.. As for the comment on school debt, it is a little misleading but good information. For instance, I closed someone last year with a whopping $300k in school debt which we deferred, but the clients DTI was still hit with a residual payment. I can be reached at should you have questions or at 303-674-0474.

  2. Thanks for the awesome idea! Working on getting my house sold, and this idea has become part of the marketing:

  3. I didn't realize that student loan debt could complicate mortgage lending. I will be sure to check if I can qualify for a conventional loan as you suggested. Thankfully I make less than the cut off so I should be able to save some money on taxes.