FHA/VA Overview


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• FHA Statistics, Profile and Benefits
• FHA Loan Limits, Recent Changes, On the Horizon,
and What's HOT.
• VA Demographics, Profile and Benefits
• High Balance VA, and What's HOT.

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  • VA loans offer a variety of advantages to borrowers. These include: Low or no down-payment options and a VA borrower can use their benefits to purchase a primary residence multiple times. Seller financing concessions and contributions are allowed up to 4% of the appraised value (or sales price whichever is less). However, non-recurring closing costs and customary discount points in certain markets are not considered a concession. Refer to the VA allowable fee section of NOW for additional information. VA loans do not charge mortgage insurance, veterans are charged a Funding Fee based on: Veteran’s service type Loan transaction type Veteran’s prior use of VA entitlement Collected up front the funding fee is: Calculated on the base loan amount Financed or paid in cash If financed it cannot exceed the maximum loan limits Another advantage is that loans are fully assumable to a qualified borrowers…potentially building in financing for the future. Loans may be assumed by a veteran or a non-veteran. And a veteran may substitute their eligibility allowing the previous veteran owner to use their VA benefits to purchase another residence There is no prepayment penalty on any VA loan WFHM has a minimum credit score overlay of 600 for loans amounts up to $417,000. a 620 credit score is require for loan amounts between $417,000 and $700,000 (and for cash our refinance loans), 660 for loan amounts between $700,000 and $1 Million and 700 for loan amounts above $1 million. Like FHA loans VA borrowers must also have a clear CAIVRS The borrower may be eligible for an interest rate reduction refinance loan to reduce rate and payment on owner-occupied and non-owner occupied loans. And lastly, HMC’s economics 10 extra bps of commission on VA loans up to $417,000 That’s $400 on a $400,000 loan amount Branch Economics Increase in revenue over Conventional Better for the Borrower, HMC and WFHM
  • FHA/VA Overview

    1. 1. FHA / VA Overview Dennis Geist Vice President - Government Programs May 19, 2011
    2. 2. Agenda <ul><li>FHA </li></ul><ul><ul><li>Statistics </li></ul></ul><ul><ul><li>FHA Profile / Benefits </li></ul></ul><ul><ul><li>Loan limits </li></ul></ul><ul><ul><li>Recent Changes </li></ul></ul><ul><ul><li>On The Horizon </li></ul></ul><ul><ul><li>What’s Hot </li></ul></ul><ul><li>VA </li></ul><ul><ul><li>Demographics </li></ul></ul><ul><ul><li>VA Profile / Benefits </li></ul></ul><ul><ul><li>High Balance VA </li></ul></ul><ul><ul><li>What’s Hot </li></ul></ul><ul><li>Summary </li></ul><ul><li>Questions </li></ul>
    3. 3. MBS Issuance by Program Share (GNMA, FRE, FNM, Non-Agency) 2010 - Conf conv = 69.5% FHA / VA = 26.4% Other (including non-conf conv = 4.1% Source: Inside Mortgage Finance
    4. 4. FHA Statistics <ul><li>Fiscal Year 2010* </li></ul><ul><li>Over 2.2 million FHA loans insured </li></ul><ul><li>51.7% of fiscal year FHA endorsements are purchase transactions </li></ul><ul><li>80% of those are made to First Time Homebuyers </li></ul><ul><li>30% of those buyers are minority </li></ul><ul><li>* Source – FHA Outlook, October 31, 2010 </li></ul>
    5. 5. FHA Profile – A quick review <ul><li>Geared toward first time homebuyers (as low as 3.5% down payment) but may be a great option for some move-up borrowers </li></ul><ul><li>Individuals with limited or no cash for a down payment and/or closing costs </li></ul><ul><ul><li>May use “ gift funds ” or have access to a HUD approved Down Payment Assistance Program </li></ul></ul><ul><li>Borrowers who may have had previous credit challenges but can demonstrate the ability and willingness to repay the loan </li></ul><ul><ul><li>Non traditional credit may be used when traditional credit does not exist </li></ul></ul><ul><li>Borrowers who may need assistance from a non-occupant co-borrower – Unique to FHA </li></ul><ul><li>Available to permanent and non-permanent resident aliens </li></ul><ul><li>A consumer who needs a high Loan To Value rate and term refinance up to 97.75% LTV </li></ul><ul><li>FHA loans are fully assumable </li></ul>
    6. 6. FHA Loan Limits <ul><li>FHA Loan Limits vary market by market </li></ul><ul><ul><li>National Floor - $271,050 </li></ul></ul><ul><ul><li>National Temporary High Balance Ceiling - $729,750* </li></ul></ul><ul><ul><li>National Reverse Mortgage Ceiling - $625,500 </li></ul></ul><ul><li>Temporary FHA Loan Limits for Los Angeles County </li></ul><ul><li>$729,750 </li></ul><ul><li>* Temporary High Cost loan limits are scheduled to expire September 30, 2011 </li></ul>
    7. 7. 2010 FHA Changes <ul><li>Mortgage Insurance* </li></ul><ul><ul><li>UFMIP reduced from 2.25% to 1% (can be financed) </li></ul></ul><ul><ul><li>Annual premiums increased from .55% to </li></ul></ul><ul><ul><ul><li>.90% for LTV’s 95% and above </li></ul></ul></ul><ul><ul><ul><li>.85% for LTV’s below 95% </li></ul></ul></ul><ul><li>Minimum Credit Score** </li></ul><ul><ul><li>Borrowers with credit scores below 500 are ineligible for FHA financing </li></ul></ul><ul><ul><li>Borrowers with credit scores between 500 and 579 will be required to make a down payment of at least 10% </li></ul></ul><ul><ul><li>Borrowers with credit scores 580 and above are eligible for maximum LTV financing (96.5%)* </li></ul></ul><ul><ul><li>FHA will continue to allow maximum LTV financing for borrowers with non-traditional credit </li></ul></ul><ul><li>HUD Mortgagee Letter 10-28 </li></ul><ul><li>HUD Mortgagee Letter 10-29 </li></ul>
    8. 8. On the Horizon <ul><li>Effective with FHA case number assignments received on or after April 18,2011* </li></ul><ul><ul><li>Annual MI premiums will increase by .25 bps </li></ul></ul><ul><ul><ul><li>Loans > 15 Years </li></ul></ul></ul><ul><ul><ul><li>≤ 95% - going from 85 bps to 110 bps </li></ul></ul></ul><ul><ul><ul><li>> 95% - going from 90 bps to 115 bps </li></ul></ul></ul><ul><ul><ul><li>Loans ≤ 15 years </li></ul></ul></ul><ul><ul><ul><li>≤ 90% - going from -0- to 25 bps </li></ul></ul></ul><ul><ul><ul><li>>90% - going from 25 bps to 50 bps </li></ul></ul></ul><ul><li>Increased Lender oversight </li></ul><ul><li>2011 - HUD will continue to focus on;** </li></ul><ul><ul><li>Following their charter supporting First-Time Homebuyer and LMI segments </li></ul></ul><ul><ul><li>Meeting statutory insuring pool requirements </li></ul></ul><ul><ul><li>Supporting the housing recovery </li></ul></ul><ul><ul><li>*HUD Mortgagee Letter 11-10 </li></ul></ul><ul><ul><li>** FHA Commissioner David Stevens - 2010 </li></ul></ul>
    9. 9. What’s HOT! <ul><li>FHA Renovation Loans </li></ul><ul><ul><li>Streamline 203k – allows up to $35,000 in non-structural repairs </li></ul></ul><ul><ul><ul><li>Great for REOs and Short Sales </li></ul></ul></ul><ul><ul><li>Full renovation program </li></ul></ul><ul><ul><ul><li>Great for curing structural problems, functional obsolesce, mold remediation </li></ul></ul></ul><ul><li>FHA and VA 5/1 Hybrid ARM </li></ul><ul><ul><li>Annual cap maximum 1% up or down </li></ul></ul><ul><ul><li>Life cap 5% above start rate* </li></ul></ul><ul><ul><li>Margin 1.75% * </li></ul></ul><ul><ul><li>Index 1-Year CMT </li></ul></ul>
    10. 10. VA Loans - Serving Those Who Serve <ul><li>Like FHA, the Department of Veteran Affairs is not a lender, they simply insure loans to VA approved lenders </li></ul><ul><li>Wells Fargo Home Mortgage is the Nations #1 VA lender </li></ul>
    11. 11. Military Demographics <ul><li>30+ million Americans* </li></ul><ul><ul><li>Veterans Are Everywhere </li></ul></ul><ul><li>Approximately 31% of in-service personnel are minority * </li></ul><ul><li>Approximately 2.4 million in-service personnel* </li></ul><ul><ul><li>Over 300 Military Instillations in the US </li></ul></ul><ul><li>Online and e-mail savvy </li></ul><ul><li>First Time and Repeat Buyers </li></ul><ul><li>* Department of Veterans Affairs - 2010 </li></ul>
    12. 12. Benefits of VA Loans <ul><li>No or low down payment </li></ul><ul><ul><li>Zero down for purchases up to $417,000 * </li></ul></ul><ul><ul><li>High Balance loans available up to $1.5 Million </li></ul></ul><ul><ul><ul><li>Requires a down payment of 25% of the difference between the zero down limit and the sale price* </li></ul></ul></ul><ul><li>VA home loan benefits can be used more than once </li></ul><ul><li>Seller concessions allowed up to 4% </li></ul><ul><li>No mortgage insurance (Funding Fee) </li></ul><ul><ul><li>VA Funding Fee may be financed </li></ul></ul><ul><li>All VA loans are fully assumable – by Veterans and non-veterans…building in financing for the future! </li></ul><ul><li>* Based on full veteran entitlement </li></ul>
    13. 13. VA Loan Limits <ul><li>Zero or Low Down Payment </li></ul><ul><ul><li>National Zero down payment loan limit - $417,000 </li></ul></ul><ul><ul><ul><li>Temporary High Balance zero down loan amounts of up to $1,000,000 * available for high cost markets </li></ul></ul></ul><ul><li>Temporary VA Loan Limits for Los Angeles County </li></ul><ul><li>$700,000 </li></ul><ul><ul><li>High Balance VA loans (with a down payment) are available in all markets up to $1,500,000 </li></ul></ul><ul><ul><ul><li>Required down payment = 25% of the difference between the sale price and the maximum VA Zero down limit </li></ul></ul></ul><ul><li>*San Francisco, Contra Costa, San Mateo, Marin, based on full veteran entitlement. Temporary HIGH Balance VA loan limits are scheduled to expire September 30,l 2011 </li></ul>
    14. 14. $1,000,000 Purchase Price <ul><li>Maximum VA Zero Down Loan Limit of $700,000 </li></ul><ul><li>25% of the difference between the sale price and the zero down loan limit </li></ul><ul><li>$75,000 = 7.5% Down Payment* </li></ul><ul><li>*Based on Full Entitlement </li></ul>
    15. 15. $1,500,000 Purchase Price <ul><li>Maximum VA Zero Down Loan Limit $700,000 </li></ul><ul><li>25% of the difference between the sale price and the zero down loan limit </li></ul><ul><li>$200,000 = 13.34% Down Payment* </li></ul><ul><li>*Based on Full Entitlement </li></ul>
    16. 16. What’s Hot <ul><li>Wells Fargo VA Fee Policy </li></ul><ul><ul><li>On July 24, 2010 Wells Fargo Home Mortgage Retail division eliminated the following fees on all VA purchase and Refinance transactions </li></ul></ul><ul><ul><ul><li>Processing </li></ul></ul></ul><ul><ul><ul><li>Underwriting </li></ul></ul></ul><ul><ul><ul><li>Commitment </li></ul></ul></ul><ul><li>No price adjustors for borrower </li></ul><ul><li>What does the competition charge? </li></ul>
    17. 17. Summary <ul><li>Have a basic understanding of FHA and VA maximum loan limits and property requirements </li></ul><ul><li>You don’t need to be near a military installation to leverage VA loans… Veterans are Everywhere! </li></ul><ul><li>FHA and VA loans are fully assumable …leverage the power of government loans to build-in financing for the future </li></ul><ul><li>Always ask the question… </li></ul><ul><li>Are You A Veteran? </li></ul>
    18. 18. <ul><li>Questions? </li></ul>