Home Affordable Foreclosure Alternatives Program (HAFA)

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FBI Investigates Mortgage Fraud Cases in Arizona

Mortgage fraud seems to be a hot topic in the media lately, both right here in Arizona as well as in the national news. Because of the current housing crisis that the country is in, many people point to “mortgage fraud” as being on the main contributing factors that put the country in crisis. And although to some people it may seem to be a case of “too little, too late”, agencies such as the FBI are cracking down on mortgage fraud.

From A Warning Posted on The FBI Website:

Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to 30 years in federal prison or $1,000,000 fine, or both. It is illegal for a person to make any false statement regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution.

Some of the applicable Federal criminal statutes which may be charged in connection with Mortgage Fraud include:

• 18 U.S.C. § 1001 – Statements or entries generally
• 18 U.S.C. § 1010 – HUD and Federal Housing Administration Transactions
• 18 U.S.C. § 1014 – Loan and credit applications generally
• 18 U.S.C. § 1028 – Fraud and related activity in connection with identification documents
• 18 U.S.C. § 1341 – Frauds and swindles by Mail
• 18 U.S.C. § 1342 – Fictitious name or address
• 18 U.S.C. § 1343 – Fraud by wire
• 18 U.S.C. § 1344 – Bank Fraud

Arizona Mortgage Fraud: It Isn’t Over

Believe it or not, mortgage fraud is still happening right here in Arizona. Do everyone a favor and if you are aware of anything that may be considered mortgage fraud, be sure to let the FBI know.

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I have heard from more than one local Realtor that many mortgage professionals are telling them that there is a new FHA Loan that only requires only a 1% down payment.

I have good news and bad news.

First the bad: FHA has not changed their guidelines recently, they still require a 3.5% down payment.

Now the good.

FREE money. Money that I am pretty sure many, many people out there can take advantage of right now – assuming that they are aware of the program.

The mortgage program that many of these Realtors have been asking me about is called the National Stabilization Program and is even better than a 1% down payment requirement – AND – when the NSP program is combined with an FHA loan, only 1% down payment is required.

We all know that the devil is in the details, so here is my best shot at describing them.

I attended a training class on the NSP program taught by the Arizona NSP director and I took as many notes as I could to help me remember what the program is all about.  Do you Follow Me On Twitter Yet?

National Stabilization Program Highlights:

• If you own a residence, you must be leasing your primary residence at least 12 months before applying for the program.
• You must use us a lender from the ADOH participating lender list.
• You must attend and complete an eight‐hour Homebuyer Education Class provided by one of the ADOH participating homebuyer counseling agencies. (A list will be provided by your lender once you begin the process.)
• The property you purchase must be your primary residence.
• You must have a maximum debt‐to‐income ratio of 31/43.
• You must be AUS approved eligible.
• You must have two months PITI reserves.
• You can use any type of financing with the NSP program – including paying cash. That means you can still get up to 22% of the purchase price even if you pay cash for the house.
• You must be approved and have your paperwork completed for the program prior to submitting an offer on a house.

National Stabilization Eligible Property Types:

• Foreclosed properties only. A property is considered “foreclosed upon” at the point that the mortgage or tax foreclosure is complete.
• One‐unit detached single family homes, condos and townhomes.
• The property must be vacant at time of listing.

National Stabilization Program Purchase Price Limits:

National Stabilization Program Income Limits:

In order to qualify for the program, you must have a gross income (the total income before taxes, health care costs, social security, etc.) of no more than 120 percent of the average median income for the county they want to purchase a foreclosed house in.

Income Limits For Maricopa County:

National Stabilization Program: 1% Down Payment?

A minimum of 3 percent of the property purchase price is required as down payment. One percent must come from the borrower’s own funds. Two percent can come from any other approved source.

National Stabilization Program: FREE Money?

1. Up to 22 percent of purchase price
2. All loans are forgivable after a period of time based on the amount of the loan.
   * 5 years for assistance of $15,000 or less
   * 10 years for assistance of $15,001‐$40,000
   * 15 years for assistance of more than $40,000
3. All loans are zero percent interest with no monthly payment.
4. The balance of the loan is forgiven at the completion of the term.

My Take On The NSP Program

This is probably the most “real” program I have seen in years. There is money available, the steps to getting the money are fairly clear and there is plenty of housing inventory right now. If you are a Realtor, I am about 95% certain that you are probably currently working with someone who can take advantage of this program – and save tens of thousands of dollars when buying a home.

So if you think the 8000 tax credit is a good selling tool to help people get off the fence, wait until they hear about this pile of free money waiting for them.

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• President Obama Says It Is Time To Refinance

In April, the details of the Making Home Affordable plan were released and it was announced that there was a “refinance” portion to the plan and a “loan modification” portion to the plan.

The rules for refinancing depended on whether your loan was owned by Fannie Mae or Freddie Mac and we talked about how to tell if your loan was owned by Fannie Mae or Freddie Mac (see below).

At that point in time, if your loan was owned by Fannie Mae, you could use whatever lender you wanted to refinance  your home under the Making Home Affordable plan (also known as the Obama Refinance). If your current mortgage was owned by Freddie Mac, the rules were that you had to use your current lender to refinance.

Not anymore.

Freddie Mac has announced that you can now refinance under the Making Home Affordable guidelines with whoever you want, you no longer have to go through the lender that you are currently with.

Highlights of the announcement:

1. You can work with your existing mortgage servicer to refinance your mortgage – and one benefit of working directly with your lender is that they will not have to re-underwrite your file.
2. If you choose to work with a different lender, they will be required to re-underwrite your file.
3. You can now roll in up to the lesser of 4 percent of the new refinance mortgage amount or $5,000 of closing costs, financing costs and prepaids/escrows.

According to Freddie Mac Executive Vice President Don Bisenius:

“We are responding to consumers’ desires to have more refinancing options. As an added benefit, we are expanding the program and providing greater flexibility in financing closing costs. Freddie Mac is committed to doing everything we can to bring the benefits of the Administration’s Making Home Affordable program to as many borrowers as possible.”

Does this mean that Freddie Mac has made it easy to use whatever lender you want when trying to refinance your home under the Making Home Affordable plan?

Not really.

But at least it is now possible.

Hurry before mortgage rates go up!

Related Information:

Find out if your loan is owned by Fannie Mae.

Find out if your loan is owned by Freddie Mac.

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In my opinion, one of the nice things HUD did in their recent mortgagee letter (2009-15) regarding the use / monetization of the new home buyer tax credit is that they specifically laid out how much “it should cost” the consumer.

According to the Official Mortgagee Letter (2009-15):

“Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)”

Not only did HUD address the issue of costs in the above section, they also mention it toward the end of the letter again.

In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:

• Name and EIN of the party who purchased the tax credit,
• The amount of the anticipated credit, and
• The amount the homebuyer paid for the monetization services.

The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.

FHA will monitor the purchase of tax credit transactions closely.  Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.

If you are a consumer and are considering using an organization to help you monetize the new home buyer tax credit, be aware that there are strict standards in place as to how much it can cost.

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• Are Any Lenders Doing The 8000 Tax Credit Monetization?

Yesterday HUD issued Mortgagee Letter 2009-15 which gave official guidance on how exactly you can turn the 8000 Tax Credit for new home buyers into cash to help you cover your closing costs and possibly part of your down payment.

Home Buyer Tax Credit Monetization: How To Claim The 8000 Tax Credit

While many people have many questions, I decided to cover the most popular ones that I hear.  What people are asking me about the first time home buyer tax credit being used as a down payment:

What Do I Fill Out To Claim The 8000 Tax Credit?

In order to claim your tax credit, you will need to obtain the IRS Form 5404 from the IRS.gov website.

Can You Assign The Tax Credit To Someone Else?

The IRS will only issue the tax credit to the taxpayer, not a third party. You cannot assign the claim for this credit to a third party.

Can You Use The Tax Credit For Your Down Payment?

The hot topic recently is “can I use the tax credit for my down payment?” and the answer to that question is technically yes – but – you cannot use the tax credit to cover the first 3.5% of your down payment, you must come up with that on your own or have it gifted to you from a blood relative.

Once you come up with the initial 3.5% down payment that is required by FHA, if you would like to use the 8000 tax credit to add to that down payment, that is allowed.

Who Will Provide The Bridge Loan / Monetization Of The Tax Credit?

FHA will permit FHA lenders and other approved government organizations or non-profits to issue you a bridge loan in exchange for a second lien on the property.

If I Take This Bridge Loan, Do I Have To Make Payments?

You might, it will depend on who you get the money from.

If payments on the loan are going to be required on the loan before 36 months, then your monthly payment will have to be considered in your debt ratios when qualifying for your first mortgage.

If payments are not required by the lender before 36 months and you decide to just “not pay” by the deadline you agreed on, the loan will convert into a “soft second” mortgage – at which time principal and interest payments will start to be required.

Is It Possible To Get Cash Back At Closing?

No. The tax credit advance, when combined with getting an FHA loan may not result in you getting any “cash back” when buying the home.

How Much Will Using Your Tax Credit For Down Payment Assistance Cost?

Any costs to you from the lender or organization who “purchase” your tax credit are supposed to be “reasonable”. FHA has even went further on this issue – they have said that any amount charged to you over 2.5% of the anticipated credit are considered excessive.

As an example, if you were going to receive a $6,000 refund, after all fees associated with the transaction, it should not cost you more than $5,850.

If You Wish To Use The $8000 Tax Credit For A Down Payment or Closing Costs:

If you are planning on using the 8000 tax credit for part of your down payment or closing costs, be ready for these things to happen when getting your file ready:

1. You will be required to complete the IRS Form 5405
2. The lender will contact your employer and review your pay stubs to confirm there are no outstanding garnishments
3. The lender will ensure that you have no unpaid student loans or other debts that could offset the 8000 tax credit – including IRS debts
4. The lender will have to validate that all requirements to receive the tax credit have been met

Other Resources:

HUD Official Announcement

Official Mortgagee Letter 2009-15

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Can you use the 8000 tax credit as a down payment for your home?

Not yet.

But that may change soon.



Yesterday, Secretary of Housing and Urban Development Shaun Donovan gave a prepared speech at the National Association of Realtors Real Estate Summit. He said something that was probably beyond interesting when he mentioned that FHA was currently working on a proposal that may involve people being able to use the 8000 tax credit as a down payment.

An excerpt from that speech regarding FHA’s position on the 8000 tax credit being used as a down payment:

And we are taking action to further help the housing market recover. I’m excited to announce here at NAR that FHA’s policy on the “monetization” of the first-time homebuyer tax credit will soon be published. I know that you’ve been waiting anxiously to hear FHA’s position on the matter. We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. According to estimates by the National Association of Home Builders, this new tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home.

We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.

Enabling first time homebuyers to use the 8000 tax credit as a down payment would be a big win for the market – it would allow many more people to move into a home who currently may not have enough for a down payment.

We will be sure to keep you posted on developments in this situation as the happen.

(h/t Mark Madsen at MyFHAMortgageBlog for sharing the video about the 8000 tax credit being used as a down payment and the guys at ThinkBigWorkSmall)

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One of my good friends (and uber-smart, I’m-lucky-to-know-her-type-of-person) originally posted this on Zillow’s mortgage blog, and since she said it so well… I figured that there was no need for me to re-say it. Thanks Mary!

Speaking from the White House today, President Obama urged homeowners to refinance.  Mortgage rates are at historical lows, and the government’s new Making Home Affordable plan has been set into motion, opening the door for millions of homeowners to refinance at a lower rate to reduce their monthly payments.

Obama noted that refinance activity has spiked recently:  “We’ve already seen a substantial jump — 88 percent increase in refinancings over the last month.”  At Zillow Mortgage Marketplace, we’ve seen it, too.  Loan requests increased 164% in March vs. February, with more than 60% requesting a refinance loan.

If you are one of the 7-9 million people who could benefit from refinancing, make sure to check the most up-to-the minute mortgage rates, and then find out what rate you qualify for by submitting a loan request on Zillow Mortgage Marketplace to get personalized mortgage quotes from our network of thousands of lenders.

More info can be found at the official government Making Home Affordable website.

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We are currently working with a couple of people who are buying a home that is owned by Fannie Mae and are getting approved for the new HomePath mortgage program. As mortgage guidelines have gotten tighter over the last couple of years, it is nice to see a program come out that actually has features like no appraisal and no mortgage insurance.

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is not in need of repairs, the “regular” Fannie Mae HomePath mortgage program is right for you.

You will often see homes that are eligible for this with the logo seen above somewhere on the sales sheets and information about the HomePath program will usually be in the remarks section of the MLS.

HomePath mortgage financing highlights include:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance
• No appraisal required — the sales price is the value
• No declining markets policy
• No loans under $20,000
• No more than 10 financed properties
• No prepayment penalties

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is in need of repairs, the HomePath renovation mortgage program is the one that you will want to look into.

You will often see homes that are eligible for this program with the above logo on the sales sheets and will usually find more information in the remarks section of the MLS.

HomePath renovation mortgage highlights:

• Financing to fund both your purchase and light renovation
• Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
• No mortgage insurance

If you are considering buying a home that is currently owned by Fannie Mae, be sure to look into the HomePath mortgage financing program.  I don’t remember the last time that I saw a loan program that said “no appraisal, no mortgage insurance and a 3% down payment!” But then again, I don’t remember a time when Fannie Mae owned so many homes.  No wonder so many great deals are being had. Don’t miss out!

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Earlier today, the details were released about the “Making Home Affordable” plan outlined by the Obama administration.

When this plan was first announced by President Obama here in Mesa a few weeks ago, my first reaction was “let’s wait for the details“.

My reaction now the “details have been released”?

I don’t know.

Really.

I really don’t have an opinion on whether or not the plan will actually help the number of homeowners as claimed by the media (9 million) – because after all, what most people really want to know is “will the plan help me in my situation” as in… “what’s in it for me“?

And each situation is individual, so be sure to speak with as many people as you can about your options. Real Estate Agents, Loan Officers, Hope Now, Loan Modification Companies, Loan Modification Attorneys – speak with all of these people if you are having trouble making your mortgage payment.

And it is entirely probable that they will all tell you different information — and hopefully with the sum of the pieces, you will be able to paint the picture of what is best for you in your situation.

Ok, sorry to ramble a little. Here is more information about the Making Home Affordable plan – be sure to read through it if you are wondering if the plan will help you in your situation. As always, let me know if you have specific questions.

Making Home Affordable — More Information From FinancialStability.gov:

Borrower Information: Making Home Affordable Refinance and Modification Options

Fact Sheet

Summary of Guidelines

Modification Program Guidelines

Counselor Q&A

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