patrick.net

Yeah that's what got me when I was buying my house. Everyone keeps talking about money down. But everyone I talked to, was getting a cut of that money down.

This was predictable when fha costs hiked and became permanent (not cancelled when ltv hits 75% anymore). The new rules priced out borrowers with poor credit and low income. Mission accomplished?!?

JH says

This was predictable when fha costs hiked and became permanent (not cancelled when ltv hits 75% anymore). The new rules priced out borrowers with poor credit and low income. Mission accomplished?!?

No one keeps their FHA that long. 9 Years would take the PMI off. In 15 years I have never seen anyone keep their FHA loan past 10 years.

Their first lien rate is better than conventional. However, you really have to be at the bottom of the economic food chain to get a FHA loan over a 95% conventional loan.

FHA is going back to what is was supposed to be. A loan for the most economic challenged people in America.

I haven't done a FHA loan since 2012. It's all conventional loans and that is a good thing for this country

Logan Mohtashami says

No one keeps their FHA that long. 9 Years would take the PMI off. In 15 years I have never seen anyone keep their FHA loan past 10 years.

That's because you are living in the previous decade. This article is about 2014. The rules have changed. Look here if you need a primer:

http://www.fha.com/fha_requirements_mortgage_insurance

If you are in the trap of thinking past performance is a predictor of future results, then consider this. The ONLY way to get out of the PMI of an FHA loan originated in 2014 and beyond is to refinance with a non-FHA loan. I highly doubt interest rates will be 4% or lower in 9 years when you say 'PMI off', meaning Logan Mohtashami says

Their first lien rate is better than conventional.

Not once origination and monthly PMI fees are included.

Logan Mohtashami says

FHA is going back to what is was supposed to be. A loan for the most economic challenged people in America.

Agreed. In my opinion FHA is symbolic; in place to make Americans think the government is helping the poor and the un(credit)worthy own homes. If you are in FHA territory, I would recommend renting a home, buying a car to build up your credit, and waiting until your credit score qualifies you for a conventional loan.

JH says

That's because you are living in the previous decade. This article is about 2014. The rules have changed. Look here if you need a primer:

http://www.fha.com/fha_requirements_mortgage_insurance

Majority of my purchase business here in So Cal 2008-2012 even to wealthy buyers was FHA. Now conventional loans are priced better in every way but now with housing inflation rising on both fronts only poor people get FHA loans. In fact I am so surprised it hasn't dropped more.

JH says

If you are in the trap of thinking past performance is a predictor of future results, then consider this. The ONLY way to get out of the PMI of an FHA loan originated in 2014 and beyond is to refinance with a non-FHA loan. I highly doubt interest rates will be 4% or lower in 9 years when you say 'PMI off', meaning Logan Mohtashami says

Every single FHA client I have I have refinanced out of PMI if they didn't sell their homes.

Also, the 9 year term time was the amount needed in the past to get out of FHA. Now you can refinance out of FHA with 5% equity build.

That is all you need to refinance out of the PMI forever clause if that was a big item for the borrower
JH says

Their first lien rate is better than conventional.

Not once origination and monthly PMI fees are included.

From .55 to 1.30 PMI GAP spread and UFMIP cost has risen so you're looking at a .50% basis point gap between the first lien and PMI than a 95% conventional.

You really have to be at the bottom of the economic food chain to get a FHA loan. However, you can refinance out of a FHA loan with just 5% equity

Logan Mohtashami says

No one keeps their FHA that long. 9 Years would take the PMI off. In 15 years I have never seen anyone keep their FHA loan past 10 years.

When I bought in 2010, you had to keep the PMI until you reached 20% equity. I'm about at that point now. Also my PMI was a small $77 a moth fee. It's now three times that at least. And I believe the PMI stays with the life of the FHA mortgage now, there is no dropping off after a certain point.

Higher FHA mortgage insurance premiums are also depressing demand for its loans and the ability of homebuyers to qualify for them. Borrowers must now pay an up-front fee of 1.75 percent of the loan balance and up to 1.35 percentage points in annual mortgage-insurance premiums.

Damn I'm just glad I bought when I did in 2010. I didn't think it was the bottom yet, but most definitely was. It's been all uphill ever since then.
In fact the FHA was making creme puff rules, I actually ended up paying less in closing than any of the 15 to 20 GFE statements they sent me out during the course of the loan process. Which btw was supposed to be a one time thing. Also the loan back then could never be more than what the GFE stated.

I would be paying at least $300 a month more in just FHA fees and bullshit had I bought this house today. Even if I bought the house for the same price.

CaptainShuddup says

When I bought in 2010, you had to keep the PMI until you reached 20% equity. I'm about at that point now. Also my PMI was a small $77 a moth fee. It's now three times that at least. And I believe the PMI stays with the life of the FHA mortgage now, there is no dropping off after a certain point.

You should have refinanced in 2012 to a conventional. I know streamline FHA was popular but if you bought in 2010 you must have had more equity in the home and brand new loan would have helped you out on the PMI.

Can your lender have them recast your loan today and get the PMI off today

Logan Mohtashami says

In fact I am so surprised it hasn't dropped more.

Me too. The numbers in the OP story are surprising they are not more significant. I honestly thought FHA would be DOA in 2014.

Logan Mohtashami says

Every single FHA client I have I have refinanced out of PMI if they didn't sell their homes.

Also, the 9 year term time was the amount needed in the past to get out of FHA.

Past tense.

Logan Mohtashami says

Now you can refinance out of FHA with 5% equity build.

You cannot cancel FHA PMI anymore. If you refi OUT of FHA, sure, but I don't know anyone who today qualifies for FHA only and tomorrow suddenly can qualify for conventional.

Logan Mohtashami says

From .55 to 1.30 PMI GAP spread and UFMIP cost has risen so you're looking at a .50% basis point gap between the first lien and PMI than a 95% conventional.

I highly doubt an FHAer is paying only 50 bps more.

One thing to remember with FHA is that UFMIP gets added to loan balance so you don't have the 3.5% equity to start off with.

FHA is just a awful loan period. I understand why it was popular right after the financial crisis because 10-5% down loans weren't open to the market back them as they were now.

The only reason anyone would get a FHA loan today is

- if they only have 3.5% down period ( barring gift $$)

You can get 95% conventional loans gifted 100% today.

What a racket we have again in housing

JH says

You cannot cancel FHA PMI anymore. If you refi OUT of FHA, sure, but I don't know anyone who today qualifies for FHA only and tomorrow suddenly can qualify for conventional.

I am in So Cal so seeing a FHA loan is like seeing Buck Rodger walk with into my office.

JH says

You cannot cancel FHA PMI anymore. If you refi OUT of FHA, sure, but I don't know anyone who today qualifies for FHA only and tomorrow suddenly can qualify for conventional.

I know you can't cancel PMI anymore but if that was a big deal to a buyer they can always refinance out of a FHA loan to a conventional loan with a lower PMI

I have done 4 of these loans in the last 14 months with a new appraisal which cuts the PMI time off the life of the loan.

It's just people don't know about this
JH says

I highly doubt an FHAer is paying only 50 bps more.

When I mean 50 basis more is this ( depending of each pricing model) I will give an example

FHA loan
3.75% First lien rate 1.30% PMI

Conventional Loan
4% First Lien rate .55% PMI
So you have a total 50 basis higher on a FHA loan

As always you tack on UFMIP which makes FHA even more expensive.

Bad bad bad loan to have FHA

Logan Mohtashami says

You should have refinanced in 2012 to a conventional.

I could have but my FHA loan is also very one sided into my favor.
No late fees,the interest rates can never increase, one payment deferment a year with no penalty, and a few other unheard of perks that have already saved my ass.

Well not that it saved my ass, but at one point this year, I was waiting for client to pay. So we paid the mortgage a little later than the 15th when my wife always paid it. I did call them and inform them that I was going to be late. But the next month we got a call from their "Collections" department, trying to strong arm me, on the 3rd of the next month.
I told her my wife always pays on or before the 15th for the last 3 or so years(at that time). She got really shitty and snapped and said. "It's due on the 1st, blah blah bla" I said "it says right on our mortgage contract that there is a two week grace period. ". Then she tried to convolute the meaning of that, and still held her position that I the payment was due on the first.
I then informed her that if the mortgage doesn't have any late fees, and the rate can't go up as the result of me paying late. Then my wife will continue to pay the mortgage on the 15th, and I did not appreciate the bank sicking their "Collection department" on this. After the way i informed them last month of my intentions, and now here they are only on the 3rd of the month harassing me like I'm a deadbeat. Had a normal bank rep called me and had a less threatening tone conversation with me. I might have been willing to change our paying habit.

The last thing I need is "Conventional loan" where the banks ends up owning my house 20 years from now, because I'm week behind on my mortgage. So they called the loan.

I'm locked into a contract that was created by a Federal act of Congress.
And it's pretty sweet, I would be stupid to recast my loan to try to save $70 over a few years, but lose so much legal standing in my mortgage that I currently have.

Now is about the tax roll assessment period, and I'll get the escrow statement in a few weeks I'll sort it all out and get the PMI off my mortgage.

I do plan on paying this off early eventually, or I'll sell it and move on.
But I'll never just refinance to be out of a FHA loan. Unless some future President fucks me over and nullifies this Mortgage.

Logan Mohtashami says

Conventional Loan

4% First Lien rate .55% PMI

So you have a total 50 basis higher on a FHA loan

Does your 1.30% include UFMIP also? That is nearly the amount of the downpayment, like you stated earlier.

I also didn't realize you were talking about conv (>80% LTV) with PMI. I am thinking of conv (>80% LTV) without PMI, which I qualify for. In my opinion, the latter is a great deal. There is very little in interest payments, so I can slap down 10% down and spread out the other 10% over the life of the loan while only paying a slight bit more over 30 years.

Logan Mohtashami says

FHA loan

3.75% First lien rate 1.30% PMI

Conventional Loan

4% First Lien rate .55% PMI

So you have a total 50 basis higher on a FHA loan

I got my loan at 4.5% I just can't justify refi my loan just to shave a few dollar off.

If things got tight, and I had to scrounge up a $1200 mortgage somehow, there's not much difference in having to scrap together another hundred and come up with a $1300 mortgage.
I would rather be dealing a bank that wont send the locksmith over while I'm already dealing with enough financial stress.

There's the small picture then there's the bigger picture.
I listened to all of the sob stories about people losing their houses, and the all start out with someone trying to either shave money off their mortgage. Or taking out a HELOC on a house they owned outright.

It's your house, not your creative investment vehicle. Credit cards I'll be a little more trusting with. But not a mortgage. I wish all mortgages were FHA mortgages, or least mortgages that were written as fairly as mine was.

JH says

I can slap down 10% down

You can do 81%-95% conventional loans now

- NO UFMIP cost

- Lower PMI rate

A lot less paperwork than a FHA loan.

Just a 2 year wait time if you want the PMI to be removed by the lender, if you don't refinance out of it.

Here is a good example

Last year a client of mine bought a home

Agency Jumbo Loan over $417,000

15% down

4.75% rate with PMI

2 months ago I refinance him out of PMI because his home went up 7% in value from last year and he got a 4.5% rate

No cost loan

Math makes the loan happen, if it makes sense it makes sense

Logan Mohtashami says

You can do 81%-95% conventional loans now

Personally, I can get 4.32% APR (up to $625k) with as low as 5% down, no points, and no PMI ever. But I realize most don't have access to that.

Logan Mohtashami says

Here is a good example

...that example is a good deal I agree. You must have more strict borrowing rules than FHA... 700 FICO? 28/35% DTI?

JH says

...that example is a good deal I agree. You must have more strict borrowing rules than FHA... 700 FICO? 28/35% DTI?

I work with over 10 lenders so each has a different pricing model for PMI

620 Fico
DTI can't over 43%
5% down needed
Lower the fico score the higher the PMI % will be ( 5%) LTV pricing gaps

Logan Mohtashami says

620 Fico

DTI can't over 43%

Those seem low and high, respectively for less than 20% down, but when 'values' are going up over 10% annually in OC, then the math works. If values drop, those loans could be challenging because clients would not get out of PMI, although they are far better than ARMs or FHA!

JH says

If values drop, those loans could be challenging because clients would not get out of PMI, although they are far better than ARMs or FHA!

All I care about for housing is that we verify income. Loans are all acting better this cycle because we verify income and for the most part, buyers have to put money down. So, this means we are back to a housing cycle where we need a job loss recession to create a distress market.

Crazy to think that we still have 4 million homes in distress in 2014, so we haven't even cleaned the distress homes from the other cycle.

Logan Mohtashami says

Loans are all acting better this cycle because we verify income and for the most part, buyers have to put money down.

...and because home values are increasing.

JH says

and because home values are increasing.

Even if home values didn't rise, now that we have sane lending standards, the market is back to normal.

I did a interview with Bloomberg today talking about that. However, as always the reason why housing has been soft is because Americans don't make enough money

https://www.youtube.com/watch?v=o9O_FDLPdgA&t=10m35s

Logan Mohtashami says

the market is back to normal

for those who can afford it. you know the OC market is not affordable. The only reason the lending market here is stable is because there is very little inventory thus fewer mortgages than in previous markets. Sellers are waiting and waiting for someone to come by with the asking price, ignoring low ballers, and eventually everything is selling. Because there is little to no competition from the sellers side. If those 4 million distressed were released to the market, however......

Logan Mohtashami says

Americans don't make enough money

or prices are too high. We all know that 2006 prices were much higher than historical norms. Now that we are back within 10% of that peak, we are back to historically unaffordable

4 of the 5 counties in So Cal ( YoY Sales) are down -13% ... -22.7% with higher inventory in all counties only Ventura is down less than double digits down -6.2%

Logan Mohtashami says

JH says

If values drop, those loans could be challenging because clients would not get out of PMI, although they are far better than ARMs or FHA!

All I care about for housing is that we verify income. Loans are all acting better this cycle because we verify income and for the most part, buyers have to put money down. So, this means we are back to a housing cycle where we need a job loss recession to create a distress market.

Crazy to think that we still have 4 million homes in distress in 2014, so we haven't even cleaned the distress homes from the other cycle.

What will it take to get the 4 million homes cleaned out?

Analyzer says

What will it take to get the 4 million homes cleaned out?

An act from Congress to allow judicial courts to not allow people to take forever to close.

roughly 3 million are still delinquent so that time lime is still 1-3 years. Less than a million are foreclosed that aren't on the market

DTI/LTI problem indeed. As a mortgage broker/lender/whatever you call it a problem with I. However, as a buyer, I call it a problem with L. You say incomes are too low, I say prices are too high.

JH says

You say incomes are too low, I say prices are too high.

It's actually part of the same equation. #DTI because higher home prices raises Debt to income ratio's

"Home prices are too damn high!"

The term “housing recovery” suggests that home prices are now “returning to normal”. In truth however, prices are rising beyond economic reality of most Americans. While home owners and housing pundits alike were glad to see the return of home values to nearly pre-recession levels in some areas, nary a thought was given to how to how this would impact demand. Prices were up 15%-45% in 2 years — the biggest 2 year expansion we have seen outside the bubble years. While we are seeing some price reductions, there really isn’t any meaningful way to get a price correction in the market until inventories increase or there is another a job loss recession. One of the best things that could happen to the housing market would be a major cooling of prices from the crazy pace we have been seeing in the past 2 years. Nevertheless, I expect home prices will continue to show growth for 2014.

Article here: Why the Financial Media and Housing Pundits Got It Wrong

http://loganmohtashami.com/2014/05/05/why-the-financial-media-and-housing-pundits-got-it-wrong/

Logan Mohtashami says

It's actually part of the same equation.

yes, exactly my point

Logan Mohtashami says

The term “housing recovery” suggests that home prices are now “returning to normal”. In truth however, prices are rising beyond economic reality of most Americans. While home owners and housing pundits alike were glad to see the return of home values to nearly pre-recession levels in some areas, nary a thought was given to how to how this would impact demand.

EXACTLY. I agree that 'recovery' and 'normal' are being used to loosely by one side of the equation. I"ll read your article later, good chat.

Logan Mohtashami says

620 Fico

DTI can't over 43%

5% down needed

Lower the fico score the higher the PMI % will be ( 5%) LTV pricing gaps

5% doesn't even cover the Realtor commissions.

jvolstad says

5% doesn't even cover the Realtor commissions.

That is to sell a home but not to get one.

When we model out how much equity is needed based on all affordability indexes a homeowner would need 28% -33% equity

Sell the home, with transaction cost covered and enough down for a 20% down payment for a move up home.

This is obvious not adding any cash into the equation and based on the 20% down payment model

This is a reason why I don't like the affordability index many people use because getting 20% down has been very difficult for main street America

CaptainShuddup says

I do plan on paying this off early eventually, or I'll sell it and move on.

But I'll never just refinance to be out of a FHA loan. Unless some future President fucks me over and nullifies this Mortgage.

Or Activist Judge, I should add to the list.