The other day my 5 year old son was playing on the computer and told me he wanted to play on the White game.  I know all the games that he plays, but there was no game called the White Game.  So, we went through all his usual games so he could show me the White Game.

Sure enough it was one of the usual games that he plays.  The thing is, the game is actually called Y8.  I had never connected the acronym, but Y8 = White.  There are so many acronym’s used in the Mortgage business, that have little meaning to most consumers.

A Sticky I don’t Need No Stinking Sticky

When I first started in the mortgage industry I worked at a company that kept track of mortgage payments on ledger cards, 5 x 7 white cards.  These cards had all the customers information.  Every time a customer would make a payment, we would write on the ledger card:  the date of the payment, the amount, amount applied to interest, the amount applied to principal, and the new balance.

Eventually our home office took over the processing of payments, as our main goal was origination of new loans.  Some customers would still send the payments to us; however, it was not an official payment until the home office processed the payment.  The home office would process the payments, and then every other day send us a sheet of stickers with all the information that we used to hand write, our administrative assistant then had to place the stickers on each customers ledger card.

Internally we called these stickers with the payment and new balance information “sticky’s”.  Because the payment wasn’t considered official until we received the “sticky” from home office, we couldn’t give out mortgage payoff’s.  One day we had a customer come into the office and request a payoff, our administrative assistant was talking to the customer, I was not sitting far from her so I could hear what she was saying.

The administrative assistant told the customer that she could not give him the payoff on his mortgage because the sticky’s hadn’t come in yet.  The customer was clearly getting agitated because he had no idea what a sticky was, or why it would hold up getting the payoff on his loan.  I went up and explained what a sticky is and explained we would get his payoff as soon as possible.

There’s an Acronym For That

In order to help avoid confusion here are some common acronym’s and their definition:

I thoroughly believe I have succeeded in answering all your questions.  However, some of the answers only led to more questions.  To sum it all up, I feel I am more confused than ever, but about more important issues, and on a higher plain.

Related posts from Indiana's USDA Home Loan Expert:

1. What’s a Credit Score Got to Do With It?
2. Rates and APR: What Do They Tell You
3. The Benefits of a USDA Guaranteed Loan to Purchase

Contained in this legislation is the authority needed to raise the guarantee fee in the USDA Section 502 Guaranteed Rural Housing Program to an amount not to exceed 3.50% of the loan amount. This change in the guarantee fee has already been referenced on USDA Rural Development loan approvals (RD Form 1980-18) that were issued “subject to Congressional action.”

This legislation also increases the funding authorization level for the USDA Section 502 Guaranteed Program to an amount that is sufficient “to meet the remaining fiscal year 2010 demand.” Therefore, no additional funding shortfalls in the program are expected for the remainder of fiscal year 2010.

With the passage of this legislation that addresses the current funding lapse in the USDA Section 502 Guaranteed Program, USDA Rural Development will begin the implementation process; which will eventually lead to the elimination of the “subject to Congressional action” language on loan approvals that has been in effect since May 27^th . Following the completion of all of the Agency’s internal requirements, USDA Rural Development is then expected to announce the restoration of funding for the USDA Section 502 Guaranteed Program.

Related posts from Indiana's USDA Home Loan Expert:

1. The Ides of March: USDA Just About Out of Funds
2. The Benefits of a USDA Guaranteed Loan to Purchase
3. USDA Funding Update

In 1971 Housing Affordability was at its highest prior to this year. Meaning that this is the best time possible to buy.

Let’s Talk Affordability

The chart below plots two things: National Association of Realtors Affordability Index (green line) and 30 Year Fixed Rates (blue line). As you can see on the far right side you have the highest Housing Affordability and the lowest Rates. So, you have the lowest prices, lowest rates, and highest affordability.

What About the ’80′s?

In the period of 1979 to 1984 you have some of the highest interest rates on record.  Yet, still a lot of people purchased homes during that period.  The people that bought homes during that time did well 15 – 30 years later.  My Mother purchased her first home during that time period even though rates where in the 12′s to 18′s.  In 1982 Housing affordability was at its lowest ever.  Inflation kicked in 1975, and rates continued an upward trend through 1979.  So, the Gap between housing affordability and Interest Rates was very wide, the widest of record.

The Best of All Scenario’s

Today we have a very wide gap as well, but in a good way.  Presently because interest rates are so low, home prices are low, and housing affordability is up, the overall risk is greatly reduced.  If the risk was so great in 1982 and homebuyers did okay, how can someone look at the chart today and say that it is riskier than in 1982.

What About the Negative News?

That’s the best part if you are a homebuyer.  Trulia recently release a report Showing Sellers Continuing to Slash Home Prices.  This means you are getting an even better price on an already reduced house.  The Department of Housing and Urban Development (HUD) just released there July report card, “The Obama Administration’s Efforts To Stabilize the Housing Market and Help American Homeowners.”  This report card shows continued affordability in the U.S. Market.

Historic low rates continue to promote affordability: Families continue to benefit from the lowest rates in history on 30-year fixed mortgages.  Since April of 2009, record low rates have helped more than 7.2 million homeowners to refinance, resulting in more stable home prices and $12.9 billion in total borrower savings.

Simple supply and Demand suggest that since there is not as great of demand now, compared to during the tax credit, housing prices will decrease thus further increasing the affordability (Read Better Deal!)  There are still large amount of houses on the market and many more still in foreclosure.  Both Federal Housing Finance Agency and Standard and Poor’s believe that House Prices are showing signs of stabilizing.

What do you think housing prices and interest rates will do in the next 12 months?

Related posts from Indiana's USDA Home Loan Expert:

1. Using a USDA Loan to Purchase a Home After a Foreclosure
2. The Ides of March: USDA Just About Out of Funds
3. Minimum Property Requirements for a USDA Home Loan

What’s Up with USDA Funds

With all the back and forth lately from USDA it would be easy to understand if people were just a little confused over whether or not a USDA Loan is available.

Round and Round

The past couple of months have definitely felt like a ride on a Ferris Wheel, first your at the bottom, they’re running out of money, you get to the top – they’ll issue revised commitments, half way back down no commitments and they’re out of money.  We are back at the bottom and on firm ground USDA will issue modified conditional commitments.  They will issue these modified commitments to the first 2.5 billion that gets submitted, that is through either the end of the Fiscal Year End, or until Congress pass Bill H.R. 4899 authorizing additional funds and an increased guarantee fee.

Why Your Are Receiving Mixed Answers from Others

The main reason that some loan officers are stating that USDA Loans are not available because their company is not set up with the right investors.  A lot of mortgage bankers warehouse lines have covenants that require them to have at least two sources to sell any product offered, with the recent shake up that is very difficult.  There is risk for those that make USDA Home Loans since they will have to hold the loans potentially a lot longer than ever before.

The Take Away

If you aren’t getting an answer on your USDA Loan or thought USDA was out of money; you can get a USDA Loan.  Give me a call let’s get started on your USDA Home Loan today

Related posts from Indiana's USDA Home Loan Expert:

1. USDA Funding Update
2. The Ides of March: USDA Just About Out of Funds
3. The Benefits of a USDA Guaranteed Loan to Purchase

While USDA Guaranteed Rural Housing hasn’t received any additional funding for the remainder of 2010 yet, you can still close with a USDA Loan.  USDA has begun issuing Modified Conditional Commitments. So cue up the music, AC/DC “Back in Black” or Aerosmith “Back in the Saddle“.

It’s time to get those USDA Home Loans closed.  If you thought you missed out on buying a new home with USDA Home loan, think again, it’s time to start shopping for your new home.  We are still accepting and Closing USDA Home loans.

These Modified Conditional Commitments come with two caveats:

1. Availability of Funds and the authority to obligate the funds
2. The Authority to charge a sufficient guarantee fee, if any is needed

What does a Modified Commitment Mean to Me the Customer

From a customers standpoint the entire transaction will be the same as before. The conditional commitment issued by USDA are the conditions for them to insure/guarantee the loan, not to approve your loan. So, you can close your loan as normal. However, one Big problem is that when USDA first announced they were running out of funds is that a lot of the investors stopped making USDA loans, and a lot of those left stopped when funds did run out. So far those that have stopped USDA loans have stated they do not plan on re-entering the USDA market until either:

1. The New Fiscal Year and more funds are appropriated, or;
2. The Passage of H.R. 4899, and USDA changing their commitments back to normal

The good news is that we are Still Doing USDA Home Loans. I have to admit there are not a lot of people doing USDA loans with the modified conditional commitments, but we are one of them.

So Why are Some Lenders So Hesitant

So, why are some lenders so reluctant to lend based on these modified conditional commitments?  The Guarantee from USDA is one of the best available to a lender. They basically cover 90% of the loan amount. Meaning if you default the most they could lose is 10%, obviously the numbers are simplified. With the modified Conditional Commitments the lenders have to meet the new conditions more funds, and ability to charge higher guarantee fee before USDA will offer them full protection. Also, USDA will not issue the guarantee if you default on the loan prior to those two additional conditions being satisfied. So, lenders that close USDA Home Loans under these modified commitments are taking on extra risk, and as we all know all lenders have been very risk averse for the past few years.

Give me a call so we can get started on your USDA Home Loan Today.

Related posts from Indiana's USDA Home Loan Expert:

1. Yes, You Can Get a USDA Loan
2. The Ides of March: USDA Just About Out of Funds
3. The Benefits of a USDA Guaranteed Loan to Purchase

http://eligibility.sc.egov.usda.gov

(click on “Guaranteed Housing” under the “Income limits” tab on the left side of the page)

or

http://www.rurdev.usda.gov/rhs/sfh/sfh%20guaranteed%20loan%20income%20limits.htm

(Direct link to the 2010 Income Limits)

The number of people used for income eligibility is the number of people living in the home,  including foster adults and foster children, not the number of applicants on the file.

The basic income limit for non-high cost counties are:

So, regardless of whether you are purchasing a home in a high-cost area or a non-high cost area the benefit is that if you only have 1 – 2 people in your household you get the benefit of a 4 person household, and if you have 5 people in your household you get the benefit of an 8 person household.

Don’t assume just because you income is over the income limit that you don’t qualify. USDA allows for deductions to income, these are only for income limit qualifying not debt ratio qualifications; so, you still get the benefit of your full income. Each household member under 18 Years old, Disabled, or Full Time Student receives a $480 deduction to your annual income. There is also an allowance for documented child care expenses.

Related posts from Indiana's USDA Home Loan Expert:

1. The Benefits of a USDA Guaranteed Loan to Purchase
2. The Ides of March: USDA Just About Out of Funds
3. USDA Funding Update

Water Quality Requirements

A USDA Home Loan requires that all private wells must meet local and State requirements.  A USDA Home Loan requires the property to have safe and adequate water.  The water system must be approved by a State or Local Government agency.  When the property has a private well system then it must meet the requirements of the State Department of Health.  Written verification must be obtained showing the water complies with the Safe Drinking Water Act and the Clean Water Act.

The present requirements for Safe Drinking Water needed for a USDA Loan:

* only one test needs to be performed for nitrates; however, a laboratory can report the results of its nitrate testing in either of the ways listed.

Testing of Well Water

It is a good practice to test your well water each year. A basic test will let you know if a problem exists. Testing more than once a year may be warranted if:

• Someone in the house is pregnant or nursing
• A neighbor finds contaminants in their well water
• Unexplained illness in the family
• You notice a change in water taste, color, or clarity
• You replace or repair any part of the well system

Most County Health Departments will do a test for your personal use free of charge.  There is a slight charge for a well test for mortgage purposes.  Before taking a water sample, contact the lab for any special instructions.

Maintaining an Existing Well

Good well maintenance means testing your well water approximately once a year. You should keep the well area clean and accessible, keep all pollutants as far away as possible, and have a licensed well driller check the well if problems are suspected. If you house has a septic as well, you need to keep it in good operating condition to keep the septic from possibly contaminating the well water.

Preventing Backflow

You should install anti-backflow devices on all your faucets with hose connections in and outside your home. Otherwise, contaminated water from a laundry tub, sink, washing machine, or pressure washer could flow back through the plumbing to contaminate your drinking water supply.

Disinfecting the Well

For every 100 gallons of water in the well, use 3 cups of liquid laundry bleach. Mix the bleach with approximately 10 gallons of water. Turn off the pump circuit breaker before removing the well cap. Pour the solution into the well. If you have a water softener this is a good time to disinfect it as well. Turn on the pump. Connect a clean garden hose and run water for about 10 minutes. Turn off the pump, put the hose into the top of the well casing, turn on the pump, re-circulate water for about 2 hours. Then open up all other water faucets in the house (faucet aerators may need to be removed to keep from clogging), until you smell chlorine, then close then shut them off. After 24 hours open all the faucets again and continue to run until you no longer smell chlorine and taste disappears.

For more information on your drinking water:

The following sites provide information on steps you can take as a private well owner:

The Groundwater Foundation

U.S. Environmental Protection Agency

American Groundwater Trust

National Ground Water Association

Related posts from Indiana's USDA Home Loan Expert:

1. Minimum Property Requirements for a USDA Home Loan
2. What Goes On At Loan Closing
3. The Benefits of a USDA Guaranteed Loan to Purchase

While this modification sounds great each of these programs to help, has garnered little support, and been able to help very few people.  The reason that each program has failed is because the guidelines for the customer to qualify are still too stringent.

The program has been modified to attempt to help those that have been effected by the economy through no fault of there own.  There is increased incentives for mortgage services to help unemployed homeowners, and for those that owe more than their home is worth.  This is still in an effort to help stabilize the housing market.

Eligible homeowners must live in an owner-occupied home, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31% of gross income), and demonstrate some sort of financial hardship.

Today is an important step forward for homeowners, who will now have more options to retain homeownership.  The use of principal write down as an additional tool in the Home Affordable Modification Program (HAMP) will offer expanded opportunities in the case of negative equity.

Faith Schwartz
Executive Director
Hope NOW

For more information on HAMP 2.0:

Making Home Affordable FAQ

FHA Refinance Fact Sheet for Underwater Homeowners

HAMP Examples

HAMP Improvements Fact Sheet

Here is a video from CNBC that goes over the new developments for HAMP:

If you cannot view the above video on HAMP Updates Click Here.

USDA still needs additional funding for the Guaranteed Rural Housing Program

One item that was completely ignored was increased funding for a program that is already working, USDA Home Loans.  A USDA Home Loan is one of the best loans available, it also has the lowest foreclosure rate of any other product available, 1.72%.  The Wall Street Journal had an excellent piece talking about USDA Home Loan and the need for Congress to authorize additional funding.

I urge everyone to contact your elected officials immediately and voice your concerns; Authorize additional funds for USDA Home Loans.

Related posts from Indiana's USDA Home Loan Expert:

1. The Ides of March: USDA Just About Out of Funds
2. What Went Wrong in the Mortgage Market
3. USDA Funding Update

Why is Mold Testing Necessary?
Testing for mold is important because mold spores can cause or aggravate many illnesses, including asthma and allergies. Some molds can cause very serious lung infections.

When should Testing Take Place?
Mold testing should be done if anyone in the household is feeling effects associated with fungal contamination. Symptoms include headaches, dizziness, difficulty paying attention, and lack of concentration.

What should I Look for?

The following are signs that mold could be growing in your home and needs to be eradicated:

1. High humidity – areas that are prone to high levels of humidity retain moisture for longer amounts of time, fostering mold growth.
2. Pipe or water leaks – surfaces that are consistently wet provide a home for mold, and leaks can be difficult to detect
3. Flooding – large scale water damage to a home is very conducive to mold growth
4. Musty, moldy odors – odors are a good indication that mold is present
5. Increased respiratory problems or allergies – a Mayo Clinic study, completed in 1999, found that most chronic sinus problems were caused by mold in the home
6. Symptoms of toxic poisoning – signs that family members are being affected include dizziness, headaches, and difficulty concentrating and maintaining an attention span
7. Leaky Roof – the attic will show signs of water damage
8. Damp basement or crawlspace – moisture in dark environments encourages mold growth
9. Rusting or condensation – can be signs of a leak
10. Discoloration or water stains on walls – water stains will indicate locations of leaks, while discolored spots may indicate locations of mold
11. Peeling paint – the mold could have had a chance to grow before the wall was painted, causing the current peeling
12. Warped wood – this is a sign that moisture is present in sufficient levels to allow mold to grow
13. Growth of mold in bathroom tile areas – this is a very good indication that mold is growing in other areas of the house
14. Visible mold growth – indicates a strong presence of mold elsewhere in the house
15. Poor ventilation – if moisture from the home, including appliances, isn’t vented, it can facilitate mold growth
16. Wet materials inside the house – any areas of carpet or flooring that are wet frequently can also house mold.

While being unsightly and sometimes difficult to clean, mold should be removed from the home. It causes damage to the home itself, but the most intense effects are upon humans. Breathing mold spores can be very dangerous, especially for the very young or those who are advanced in years or adults with compromised immune systems. If you locate any of these signs in your home, it’s time to conduct testing for mold to see how extensive the problem has grown.

To get my FREE 48 page eBook titled “Understanding Mold” . Simply fill out the form below, and I’ll rush it to you.

Related posts from Indiana's USDA Home Loan Expert:

1. Minimum Property Requirements for a USDA Home Loan
2. Private Well and USDA Home Loan
3. REO Properties and USDA Loans

USDA has Almost Exhausted Funds for the Year

In Indiana a USDA Home Loan is the best loan available, allowing buyers to purchase a home with no down payment, and no monthly mortgage insurance.  A USDA Home Loan is such a popular loan that it has been running out of funds quicker, and quicker each year.  Each year, new funds are appropriated to allow the USDA Home Loan program to continue to operate.  This year is no different.

USDA sent out an announcement on March 10, 2010:

Notice of Funding

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.  Should you have any questions, you may contact the Single Family Housing Guaranteed Loan Division at (202)720-1452.

So, what does this mean

First, in years past when similar announcements were delivered, USDA will NOT issue conditional commitments for loans, as the program awaits new appropriations from Washington.  This means that lenders will not continue to close USDA Home loans in anticipation of new appropriations.

This could potentially mean that the USDA Home Loan Program will not get new funds until after it’s 2010 Fiscal Year End, September 30, and then not have funds available until November or even December.  Because of how weak the housing market and economy is, this scenario is very unlikely, and since a large portion of the USDA Home loans are utilized by first time home buyers.  The first time home buyer market is a portion of the economy that the government is trying desperately to help.

If you do not presently have an accepted purchase offer, or are attempting to purchase a short sale, you must get the offer accepted quickly to get your loan closed and funded before funds run out.  I would expect funds to be depleted by the middle of April.  If you are unable to get closed in time you will need to put down 3.5% for an FHA loan, or 5% for a conventional loan.

What can you do

Contact your members of Congress regarding this funding crisis and reiterate the negative impact to low-and-moderate income rural families and to rural communities (Basically ALL of Indiana).  Let them know that we need funds to get the housing market back on track.  The Department of Agriculture is obviously attempting to get additional funding, and pursing changes to the program that could help or possibly completely eliminate future funding problems, but they need our help.  Your elected officials contact information.

Available Funding:

Fiscal Yr 2010 Congressional Appropriated Funds:          $13.5 Billion

Fiscal Yr 2010 USDA Rural Obligations:                                  $9.7 Billion (as of 3/22/10)

Available Funds: $3.8 Billion

Basically, in half of the USDA fiscal year they have depleted their entire funds for the year

I will update you as more information comes available.

Related posts from Indiana's USDA Home Loan Expert:

1. USDA Funding Update
2. Great News on USDA Home Loan Funds
3. The Benefits of a USDA Guaranteed Loan to Purchase