FHA Streamline

The housing market has fallen; this is not new news. This is especially true for home values all across the country. Hundreds of thousands of people are finding that the homes they treasure so much are not nearly as treasured by the public market. However, you may still want to lower your payment and interest rate. How is this possible when home values have fallen so low?

There are a few options you have in front of you. One of those options is a FHA Streamline Refinance. The beautiful thing about this loan is that there is a “No Appraisal” option with minimal credit requirements! This means that you can get a lower fixed rate and payment on your FHA loan; even if you owe more than your home is worth! Since the process is streamlined, there is less hassle, less paperwork, and quicker closing times than with a standard FHA refinance.

Want to know more? Want to find out if you qualify? Give one of our mortgage professionals a call today to find out how you can lower your payment and interest rate with an FHA Streamline!

USDA Interest Rates

This is arguably the hottest topic in the entire mortgage universe, “What is the lowest interest rate I can possibly get?” That, ladies and gentlemen, is the $64,000 question and yet the answer changes every day; even multiple times a day! However, the never ending quest for this answer leads most people to question the validity of FHA vs. Conventional vs. USDA vs. VA in terms of finding the lowest rate.

The truth of the matter is that yes, you can shave fractions of a point by bouncing between these loans and seeing which one posts the lowest rate at the time you look at it. What determines your interest rate more is the type of mortgage and length of time your mortgage runs for. I speak specifically about a fixed vs. an ARM vs. an Interest Only loan, or one of the several other possible programs available. These individual programs affect rate more than the people sponsoring it.

The biggest question is which program is best for you based on your own individual situation. Are you a member of our military? Do you live in a rural community? How much of a down payment can you afford if any? Based upon these and several other factors, you may qualify for a loan program you never even knew existed getting you not only a low rate but also a low monthly payment with a larger budget for a house!

Want to know more? Call one of our mortgage professionals today to find out what loan program suits you best and how you can lock the lowest rates of the day, or possibly even the hour! Hurry!

FHA 203K Loan

It’s Saturday, and you are checking up on the latest “Honey Do…” list and things seem to be amiss. You see things like, “Renovate kitchen, expand garage into sunroom, remove and replace old carpeting, rewire house...” All these things seem way out of your league both financially and skillfully. How are you ever going to be able to complete all these renovations and repairs?

Fear not! The FHA 203K loan may be the solution to your worries. The FHA 203K Rehab and Renovation Loan can be used in one of 3 ways:

1. To purchase an existing home (and the land attached to that home) to renovate it.
2. To payoff existing debt on a current residence and renovate it
3. To purchase an existing home with the intent to move it to a new piece of land in a more preferred location.

To put it simply, the only things that FHA and HUD generally frown upon are non-permanent additions to the property and luxury items that are being installed. However, there are several things you might not think qualify for the 203K loan but in fact do:

1. New freestanding appliances
2. Upgrading HVAC
3. Adding energy efficient improvements
4. Wells and septic repair and upgrades
5. New siding
6. Interior painting
7. Exterior painting
8. Finishing the basement
9. Bedroom additions
10. New deck / patios
11. New hardwood flooring
12. New doors and windows
13. Upgrading plumbing and electrical
14. Opening up the floorplan
15. New granite countertops
16. Vaulting the ceilings
17. Making a house handicap accessible
18. Getting a condo or house ready for a new college student
19. Solar panels
20. Low flow toilets and shower heads

Any of these things sound interesting to you? Give your local mortgage professionals a call at First Option Mortgage and find out what brand new things you can do to your home!

Plan launched to help 'underwater' borrowers

By Alan Zibal

WASHINGTON — The Obama administration is trying to jump-start its sputtering attempts to tackle the foreclosure crisis with an effort to assist homeowners who owe more on their properties than their homes are worth.

Starting Tuesday, the Federal Housing Administration will permit lenders to give these borrowers refinanced loans backed by the government. The lenders will be required to forgive at least 10 percent of the original mortgage amount. Investors who have control over the mortgages as part of their large portfolios will select which borrowers are invited to participate.

The plan was first announced in March. Its rollout represents the latest of numerous efforts by the administration to address the housing bust. So far, the government has only nibbled around the edges of the crisis, as its programs have run into numerous problems.

The lending industry was ill-prepared for a crush of distressed homeowners, the economy worsened and millions of homeowners had taken on so much debt that their financial woes have been nearly impossible to resolve.

Nearly half of the 1.3 million homeowners who have enrolled in the Obama administration's main mortgage-relief program — overseen by the Treasury Department — have already fallen out over the past year.

Story: Closing Costs: Recently sold megahomes
Many borrowers say the government program is a bureaucratic nightmare, with banks often losing their documents and then claiming borrowers did not send back the necessary paperwork. Banks say borrowers often didn't return the required documents.

The new refinancing program takes a different approach. It allows investors in mortgage-backed securities to evaluate their holdings and select borrowers that will be offered refinanced mortgages guaranteed by the FHA.

The theory is that there are some loans that investors simply want to unload because they have a high risk of default.

However, when faced with the choice between slashing the amount borrowers owe on their home loans and foreclosing, lenders have generally chosen to foreclose on borrowers. Many experts doubt the new program will persuade investors to change their minds.

Government officials acknowledge that getting the plan going will be complicated. FHA Commissioner David Stevens said in a statement that it "requires significant coordination and operational execution by several parties to be successful."

The government estimates that between 500,000 and 1.5 million homeowners could be helped. But Stevens said the number of borrowers who actually benefit will likely be toward the low end of that range.

Even so, Keefe, Bruyette & Woods Inc. analyst Bose George called the government's estimates "extremely optimistic." George said investors are likely to only offer refinances to borrowers who have seen their home values plunge to the point where they owe 40 percent more than their home's current value. Those homeowners, he said, are in danger of walking away from their mortgages.

"We're assuming that the impact is minimal," he said.

Story: Colleges going on real estate shopping sprees
The program is funded with $14 billion from the Obama administration's existing $75 billion mortgage assistance program. That money will be used to cover incentive payments to lenders and losses from borrowers who fall back into foreclosure.

To qualify, borrowers must be up-to-date on their mortgages, though many people who have already received loan modifications through other programs are still eligible. The plan is limited to loans in which homeowners owe at least 15 percent more than their home's current value.

Analysts at Barclays Capital estimated last month that the refinancing program would only aid between 200,000 and 300,000 homeowners. If it reaches that many, it would be a small share of the number of Americans with so-called underwater mortgages.

As of the end of June, about 11 million U.S. homes, or 23 percent of those with a mortgage, were in this position, according to real estate data provider CoreLogic.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

First Option Mortgage Moves Into a New Office Space

The Business Journal ran a nice story on our firm as we grew, despite the recession and the housing market crash, by providing consistent financial mortgage services to customers in a straightforward manner.  Unlike the many other mortgage firms that are now out of business, we are growing the right way with the right level of balanced risk.

Take a look at the Atlanta Business Journal article from 2009 - Business Journal Article about First Option Mortgage

For more information about our Atlanta Corporate Office - First Option Mortgage Atlanta Corporate Office

MSNBC and Freddie Mac: The Lowest Mortgage Rates in History

Freddie Mac posted its lates mortgage rates figures showing that mortgage rates are the lowest since the company has tracked them (the 1950s).

Here is a great article on MSNBC about the low mortgage rates:  www.MSNBC.com

"Mortgages are cheaper today than they've been in a half-century. If only most people had the job security, the credit rating and the cash to qualify for one or refinance.   The average rate for a 30-year fixed loan sank to 4.69 percent this week, beating the low set in December and down from 4.75 percent last week, Freddie Mac said Thursday. Rates for 15-year and five-year mortgages also hit lows. Rates are at their lowest since the mortgage company began keeping records in 1971. The last time they were any cheaper was the 1950s, when most long-term home loans lasted just 20 or 25 years." - MSNBC.com

April 2010

The April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices

The April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. The survey included three sets of special questions. The first set asked banks about lending policies regarding business credit card accounts for use by small firms. The second set queried banks about the use of loan extensions on commercial real estate loans. The last set asked banks about the effects on their lending standards and terms of the adoption of new accounting standards issued by the Financial Accounting Standards Board. This summary is based on responses from 56 domestic banks and 23 U.S. branches and agencies of foreign banks.

The April survey indicated that most banks kept their lending standards unchanged in the first quarter, but that moderate net fractions of banks further tightened many terms on loans to businesses and households. For almost all loan categories for which the survey indicated a further net tightening of credit standards, the fraction of banks that reported having done so edged down and in a few categories banks eased standards, on net. The survey also indicated that loan demand generally weakened further.

Most of the banks that reported having eased some lending policies in the April survey were large banks. A number of large domestic banks eased standards and some terms on commercial and industrial (C&I) loans to large and middle-market firms. Branches and agencies of foreign banks also reported easing standards and terms on C&I loans, on net. However, standards on C&I loans to small firms were roughly unchanged, and terms on such loans were tightened further over the past three months. Turning to lending to households, large bank respondents eased standards, on balance, for both prime residential mortgages and home equity lines of credit, while other banks tightened standards for both categories of lending. On net, large domestic banks accounted for an easing of standards on non-credit-card consumer loans. In contrast, modest net fractions of large and other domestic banks continued to tighten standards and terms on credit card loans over the past three months.

Domestic survey respondents indicated that demand weakened further for all loan types. A decline in demand for prime residential real estate loans was reported by a larger net fraction of domestic banks than in the January survey, but for other types of loans the net fractions of banks that reported weaker demand continued to wane. Indeed, branches and agencies of foreign banks reported an increase in demand for C&I loans, on net, over the past three months.

Questions on commercial and industrial lending. On balance, a small net fraction of banks reported easing their lending standards on C&I loans to large and medium-sized firms. The previous survey in January showed the first net easing of standards on such loans since the onset of the financial crisis in the summer of 2007. While the net fraction of banks that eased standards on these loans in the April survey increased only slightly, the latest survey marked the first time since 2006 that banks reportedly eased standards in two consecutive quarters. However, standards likely remain quite stringent following the prolonged and widespread tightening that took place over the past few years.

Among domestic institutions, large banks were responsible for the reported easing of standards to larger C&I borrowers. None of the smaller banks, which compose roughly half of the respondent panel, indicated that they had eased their standards on C&I loans to large firms over the past three months. On net, a small fraction of branches and agencies of foreign banks participating in the survey reported easing standards on C&I loans. Large domestic banks also eased some terms on C&I loans for large and middle-market firms, on net, as did the foreign branches and agencies. On balance, the large domestic institutions mostly trimmed their pricing terms, including the cost of credit lines and the spreads of loan rates over their costs of funds, while the branches and agencies eased each of the seven surveyed C&I lending terms, on net.

When asked about standards on C&I loans to smaller firms, almost all domestic banks, regardless of size, reported little change. However, net fractions of domestic institutions reported tightening terms on C&I loans extended to smaller firms. This reported tightening of terms was more prevalent at smaller banks. Notably, the net fraction of banks that had increased premiums on loans to riskier borrowers remained fairly elevated in the April survey.

According to the survey, the three factors that exerted the greatest influence on banks' C&I lending policies over the past three months were competitive pressures, the economic outlook, and tolerance for risk in the C&I loan market. In particular, domestic banks that eased their C&I lending standards pointed to increased competition from other banks or nonbank sources of credit as an important factor in their decision. Also, about two-thirds of such banks cited a more favorable or less uncertain economic outlook. Only a few banks reported having eased lending policies in response to an increased tolerance for risk. By contrast, banks that tightened standards or terms on C&I loans generally indicated that they viewed the economic outlook as less favorable or more uncertain and also reported further reductions in their tolerance for risk.

Small net fractions of banks reported that demand for C&I loans from large and middle-market firms and from small firms weakened further over the past three months. The reported weakening in loan demand was concentrated at smaller domestic banks, while large domestic banks reported little change in demand on net. A moderate net fraction of foreign banks indicated that demand for C&I loans strengthened over the same period. Nearly all of the domestic respondents that reported weaker demand cited borrowers' reduced need to finance plant and equipment investment, and large majorities also indicated that demand for inventory and accounts receivable financing declined. Among the domestic banks that reported increased demand for C&I loans, the most commonly cited reasons were increased needs to finance inventories and accounts receivable and a pickup in mergers and acquisitions. About half of those banks also reported having seen a shift of demand to their bank from other sources of external finance.

Special questions on credit card loans to small firms. The April survey included a set of special questions that asked domestic banks about standards and terms on credit cards for use by small firms. A majority of respondents indicated that their standards for approving such business credit card accounts are currently tighter than the longer-run average level that prevailed before the crisis. In addition, significant net fractions of respondents to these special questions indicated that their banks had tightened their terms on business credit card loans to small firms--for both new and existing accounts--over the past six months.

Questions on commercial real estate lending. A significant number of domestic banks, on balance, continued to report having tightened standards on CRE loans. However, this net fraction was considerably smaller than in the January survey. As in the previous survey, domestic banks reported weaker demand for CRE loans, on net. However, in the latest survey, the net fraction of banks reporting weaker demand moved below 10 percent for the first time since the financial crisis began. In contrast, branches and agencies of foreign banks reported no change in CRE lending standards, on balance, and a small net fraction of these respondents experienced an increase in demand for CRE loans.

Special question on the use of CRE loan extensions. In response to a special question, sizable fractions of both domestic and foreign respondents reported having increased their use of CRE loan extensions over the previous six months.⁴ Only two domestic banks and one foreign bank reported having reduced their use of loan extensions during that period.

Questions on residential real estate lending. With regard to loans secured by residential real estate, most banks reported essentially no change in their standards on prime and nontraditional mortgages over the past three months. The April survey results included the first net easing of standards on home equity lines of credit since the question was first asked in January 2008. Compared with the January survey, a more sizable fraction of banks indicated that demand for prime mortgages weakened over the past three months and a fairly large net fraction of banks also reported that demand for home equity loans weakened over the survey period.

Questions on consumer lending. On balance, domestic banks reported tightening their lending standards and terms for credit cards, but their lending stance toward other consumer loans eased. A small net fraction of banks reported having tightened standards for credit cards, and moderate fractions reported having reduced credit limits and increased spreads of interest rates charged on outstanding credit card balances. The further tightening of standards and terms on credit card loans, however, did not carry over into other consumer loans, as small net fractions of banks reported having eased standards and reduced spreads for such loans. Moreover, the net fraction of banks that reported an increased willingness to make consumer installment loans increased again. As in recent quarters, a moderate net fraction of respondents reported weaker demand for consumer loans of all types.

Special question on Statements of Financial Accounting Standards Nos. 166 and 167 (FAS 166 and 167). A final special question on the April survey asked banks whether their lending policies for businesses and households had changed in response to FAS 166 and 167, new accounting rules that most banking institutions adopted with their first-quarter financial statements.⁵ No respondents to this question indicated that their banks' lending standards and terms had changed as a result of the new rules.

¹Respondent banks received the survey on or after March 30, 2010, and their responses were due on April 13, 2010.

²For questions that ask about lending standards or terms, reported net percentages equal the percentage of banks that reported tightening standards ("tightened considerably" or "tightened somewhat") minus the percentage of banks that reported easing standards ("eased considerably" or "eased somewhat"). For questions that ask about demand, reported net fractions equal the percentage of banks that reported stronger demand ("substantially stronger" or "moderately stronger") minus the percentage of banks that reported weaker demand ("substantially weaker" or "moderately weaker").

³Large banks are institutions with more than $20 billion in total assets as reported on the December 31, 2009, Call Report.

⁴Survey respondents were instructed that for the purposes of the special question, a loan extension was to be defined as a modification of a loan at or near the end of the original term that extends the term of the loan, as opposed to a newly underwritten loan used to refinance a maturing loan.

⁵Published by the Financial Accounting Standards Board in June 2009, FAS 166 and 167 eliminated the concept of a "qualifying special-purpose entity" and made achieving off-balance-sheet treatment of assets much more difficult. For more information on FAS 166 and 167, please see Financial Accounting Standards Board (2009) "FASB Issues Statements 166 and 167 Pertaining to Special Purpose Entities," news release, June 12, www.fasb.org/cs/

This document was prepared by Mary Beth Chosak with the assistance of Michael Levere, Division of Monetary Affairs, Board of Governors of the Federal Reserve System.

Federal-Reserve-Board-Tighter-Lending-Standards.pdf (365.35 kb)

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