“I’m from the government and I’m here to help”, yeah right! Based on current law a borrower can sign their loan docs on the eighth business day after the loan was disclosed. We think that this law was put into place because some unscrupulous lenders were slamming borrowers in to bad loans. This protection would generally be a good thing. However there are always unintended consequences. One of our borrowers purchased a flipped property with a purchase price greater than 20% over the sellers cost. In addition it was purchased less than 90 days ago. Initially the borrower applied for an FHA loan, but that is a whole different story which we talked about last week. Long story short, we needed to convert to a conventional loan. Conventional lenders are also very concerned about flips with less than 90 days between the current seller’s acquisition date and the new close of escrow. The 91st day on this transaction is June 24. On that day we will have a new appraisal, contract and prelim. The borrower was hoping to take advantage of the Federal Tax Credit that that is set to expire June 30th (yes we know it may be extended, keep your fingers crossed). If we re-disclose on the 24th of June, he cannot sign his doc’s until July 3. The borrower is not happy about that. There is one exception in the law that would allow a borrower to sign before the 8th day. Here it is: “Imminent sale of the consumer’s home at foreclosure, where the foreclosure sale will take place unless loan proceeds are made available to the consumer during the waiting period, is one example of a bona fide personal financial emergency”. Sorry losing your tax credit is not classified as a bona fide emergency.  


The 5% Rule
Staying with our theme I’m from the government…We have or had a borrower that purchased a home back in November of last year and has an FHA loan. We were going to do an FHA streamline refinance (no appraisal required) lowering the borrower’s rate ½ of a percent and there were no recurring closing costs that the borrower was paying. The only thing they were paying for upfront was the money necessary to re-establish their impound accounts. By the way when they pay off their existing loan most of the impound money goes back to the customer. Granted ½ point drop in rate is note huge, but it wasn’t costing them any money nor were they using equity to pay for the refinance. In addition, the borrowers were going to keep this house a long time and it made sense to us and them, but not to our government. We fell into a booby-trap, an FHA streamline refi requires a 5% reduction from the current piti to the new piti. One work around is not to go streamline and get an appraisal. Normally this would work except in cases where the value has decreased from the date of purchase to the date of the refinance. OK, we will not forget the 5% rule

 

HO, HO, HO 6
Reminder, if you client is buying a condo or townhome they need HO 6 (contents) insurance. The insured amount needs to be at least 20% of the value of the property. Many borrowers are unaware of this and are not happy about the last minute hoop they need to jump through. Let’s keep our clients happy, remind them about HO 6.

 

Today we talked with a client that had a middle credit score of 615, they are relocating from the east coast. With the stress of a new job, moving and getting the kids in school it was overwhelming to them. We counseled them to just rent, get the scores up then buy. They were revealed and happy after this discussion. They told us we had a customer for life.

Sincerely,

The (Recently Expanded) Meredith Team

Kathleen, Erin, Monica and Guy

The Meredith Mortgage Team, CMPS®

Certified mortgage planning specialist

“We Will Always Have Your Best  

  Interest In Mind”   

 

 

Erin & Kathleen

The Bay Area’s Premier

Mortgage Banker and Broker

 

(925)983-3048 office

(925)226-3215 efax

(925)918-0585 mobile

meredithteam@cmgmortgage.com

emeredith@cmgmortgage.com

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