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"Depressed" area mortgage help...

Old 03-11-08, 05:50 PM
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"Depressed" area mortgage help...

So I'm building a home in Florida and we're about two months in. Slab is being poured tomorrow or Wednesday, the loan has been approved, funds are good... things look to be in good shape.

I got the revised "good faith" estimate today from Countrywide today (the builder's preferred lender) and see that the estimated closing costs jumped up by about $2500. Not a deal breaker or anything, but I was a little pissed and started to shop around for new loans. I called Wells Fargo and Wachovia and they both said that Fannie Mae has declared my county "depressed" for home sales and they both require a 5% additional deposit on whatever loan program you're on. So if you're doing a 100% loan, you need to put 5% down, for a 95% loan you need to put 10% down, and etc... We gain none of the benefits of putting extra money down, but just need to put more cash into the down payment for closing.

Anyway, both banks were SHOCKED that Countrywide wasn't making me pay this premium. I'm putting 5% down, and with the new increased closing costs, I don't think I could afford another 5% at closing. We're about 6 or 7 weeks out from closing, can Countrywide demand this premium anytime before closing? And I'm assuming that if I don't want to put up this cash that I'm out everything I've already deposited in escrow, correct?
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Old 03-11-08, 06:11 PM
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It really depends on what your agreement for buying the home says. If it species the financial contingency, you might be okay. But that is what you need to look at. You aren't really fully approved for a loan for quite some time, so things can change. It can be a seedy business, espeically right now.
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Old 03-11-08, 06:47 PM
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Originally Posted by kvrdave
It really depends on what your agreement for buying the home says. If it species the financial contingency, you might be okay. But that is what you need to look at. You aren't really fully approved for a loan for quite some time, so things can change. It can be a seedy business, espeically right now.
I'll have to check that out. I don't recall the specifics off the top of my head. I called a couple more banks just to get quotes and a few said that being with Countrywide might actually avoid that premium because of the shape they're in right now.

The thing that I can't believe is that the builder is physically building this home off of Countrywide's approval, but I've only deposited about ~$7k into the process. An extra 5% would represent about $8600 that I would have to fork over at closing, and I'd pretty much just decline and try like hell to get as much of my deposit back as possible. With as many homes that are going up in the development I'm in, I can't imagine Countrywide trying to force that many people to come up with the extra 5%, but maybe it's just wishful thinking on my part.
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Old 03-11-08, 06:47 PM
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It's not a premium. If Countrywide will let you put 0% down normally (such as on a Flex100, MyCommunity, or a Fixed 30 EA1) then you can do this with 5% down. What you're not getting is the same 5% down program as someone buying in a non-depressed area, for example, someplace in Missouri.

As long as you're putting 5% down, if you could quality for a 0% mortgage (credit-wise) you're fine.

This is not an additional deposit or anything. It is a nationwide Fannie Mae requirement.

I just checked my email and it looks like Countrywide instituted these soft market requirements back in November of 2007. I would be almost positive that you're fine with putting 5% down as per my scenario above.

Your closing costs may have increased due to either your loan not being locked (mortgage prices have tanked since mid-January) or someone not knowing what they were doing and misjudging your title fees or prepaids. Either is inexcusable honestly.
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Old 03-11-08, 06:51 PM
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Originally Posted by BravesMG
With as many homes that are going up in the development I'm in, I can't imagine Countrywide trying to force that many people to come up with the extra 5%, but maybe it's just wishful thinking on my part.
Your "extra" 5% is already priced in. You're putting 5% down on a 0%-down mortgage program.

Has the appraisal been done yet? Make the builder aware of this:

Originally Posted by CW Corporate Email
The appraiser must use at least one current sale form the subject builder/developer in the project, and EITHER:
One current sale from a competing builder/developer, OR A resale from within the subject property’s development that has closed within the last 30 days.
  • Provide at least one current listing from the Multiple Listing Service (MLS) or pending sale and include it in the appraisal comparable grid.
  • Provide days on market for subject and comparable sales (if applicable).
  • Since 100% programs still exist, you're fine with the 5% down. I'm shocked that Wachovia and others didn't even mention it.

    Let the builder know that Countrywide is being extremely tough on appraisals. If they order a review appraisal (from their appraisal company, Landsafe) and it comes back lower, you'll need to lower your purchase price.
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    Old 03-11-08, 07:55 PM
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    Thanks for the info Bus, let me see if I can clarify. The Countrywide program I'm on is the "Fast and Easy" method, where my high credit score lets me bypass a lot of the income and employment verifications that a regular mortgage would have.

    The idea throughout the whole process has been that I'm looking to put 5% down, which was the minimum payment that the "Fast and Easy" process would allow. The estimate I just received says that I don't need to pay any PMI (which I obviously would be on a 0%, I honestly thought I would be on 5%). So I've already put say $7k down, and I owe roughly $7k at closing. What Wells Fargo/Wachovia told me is that they just instituted policy in depressed areas that would require $15k at closing (5% extra) because they just instituted this policy for depressed areas. When I began shopping mortgages about 2 months ago, they didn't mention this.

    I'm confused here Bus, are you saying that the 5% I'm putting down is being treated as a 0% loan? And if so, why would no PMI be listed on my good faith?

    I have a feeling that the closing cost fuck up was just laziness on behalf of the initial loan officer. I'm trying to get another closing quote on my sale price, but I haven't gotten to that step with the other banks.

    I'm starting to become terrified of this freaking close. We think we got a hell of a deal on this house, it's just what we want, we can afford it and we like the area. I've got another 6 or 7 weeks to sweat this out. Am I thinking about this incorrectly?

    I also did check with the builder (KB Homes) and they say that their appraisal values have been consistently above the sale price, so I would think I'm in good shape on that one, but I guess you never know until closing.

    Edit: My fault, my fault. There IS PMI in there at about $107, I think I get it now.

    Last edited by BravesMG; 03-11-08 at 08:11 PM.
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    Old 03-12-08, 12:48 PM
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    You probably had their commitment before these mortgages were eliminated. It's not additional cost as your payment would go down but I see your point as far as the extra money goes.

    GFE's have to in within a certain % by law. Check and see where the extra fees are from. If the title company is banging you or something like that you have recourse.
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    Old 03-12-08, 01:11 PM
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    You mention your terrified, make sure you:


    1. Have a blood sucking lawyer (sorry lawyers) with you at the closing. Your title company can probably provide one. Make sure your title company DOES NOT REPRESENT YOU AND THE SELLERS.

    2. Be very careful they don't try to pull something on you and give you an adjustable mortgage or other dirty trick. Some friends purchased a house and at closing the builder's mortgage company tried to get them into an adjustable when they quoted a fixed. They said no and wanted the fixed or to be able to bring their own financing. They had to threaten to walk (which they would have done, it was like a $7k deposit) before they would change it. The builder/mortgage company were shocked they were willing to walk away from the house over a little thing like an adjustable vs fixed mortgage
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    Old 03-12-08, 03:08 PM
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    Well, first off, hate to break it to you but unless you had your loan registered and locked by Monday, you're not getting this mortgage. Countrywide just changed their regulations and the loan needed to be registered, approved, and locked by this past Monday, March 10. The loan must also fund by April 9, meaning that's the last day that you can buy your house under that program.

    The Fast & Easy program was recently upgraded to 95% financing. Now, it's going back to where it used to be: 90% financing. Add on the fact that you're in a Soft Market location, and you need to knock another 5% off. That's worst case scenario.

    Best case scenario, Countrywide's Retail and Wholesale operations differ. Even so, you'd still need to knock 5% off the total LTV for your total Loan to Value Ratio. That's not a Wells Fargo / Wachovia rule. That's a Fannie Mae rule, and Countrywide is following it. I've been getting near-weekly updates for the past couple of months but didn't look at it too closely since there was never a ridiculous housing bubble here the way it was in CA/Fla/Vegas/AZ/etc.

    If I were you, I would be concerned. Try to get this cleared up as quickly as possible. It is entirely possible that the person you're working with has no idea what they are doing. The only way that I would consider you "safe" is if you have a commitment in-hand from Countrywide. This is not a form letter from their branch (or the person you're working with), this is an electronic printout showing the loan number, lock rate, conditions/status, etc. If you have one of these, then you should be fine. But you still need to check about the last day of funding. April 9 may be a deadline for you and your mortgage guy/girl doesn't know it.

    The good news is you can still get 5%-down financing assuming you can prove income and assets.

    Last edited by The Bus; 03-12-08 at 03:10 PM.
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    Old 03-19-08, 05:58 PM
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    First, thanks very much to everybody for the advice. It's honestly much appreciated. Bus, I returned your email. I apologize that I don't check the email that DVDTalk points to, I just changed it.

    Countrywide called me late last week and said that my loan counselor was basically fudging all of her numbers completely, and hiding the 5% penalty until she got her "approval", which was exactly as Bus described it. It was just a commitment to loan kind of thing, not a verifiable and executable mortgage. As soon as that pseudo-approval was in, she got credit for her quota or whatever, and was going to leave it until closing. Somebody noticed that I didn't have the 5% tacked on, and basically called and said that she was hiding the charge, and they're sorry, but it is a mandated 5% charge to close.

    For all intents and purposes I'm done with Countrywide. That was the biggest sham of a process I've been through in quite a while. So I'm now onto two new plans that seem to be working well and wanted to get any additional thoughts.

    An FHA loan is in process that is not affected by the 5% depressed market penalty. So if I'm approved for that process, everything is good, and my up front cash goes down significantly with a reasonable increase in my monthly payments. This is optimal, I would be ecstatic if this comes back approved next week.

    The next option is an 80/15/5 double mortgage where I put the expected 5% down. Because the LTV ratio on the first mortgage is low, I don't have the 5% penalty. The only issue is that the 2nd mortgage is at a higher rate, but it's not a big deal at the amount I'm looking at, plus the PMI is significantly reduced making it almost a wash. If this comes in I'd be pretty happy, I think I'd prefer the FHA loan, but either one would be great.

    Am I thinking about this correctly? This is my 2nd home purchase, but I think I could have used an incorrect social security number and not paid my closing costs and still gotten the first mortgage at the time. My wife and friends are all clueless to this stuff, so any help is very much appreciated.
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    Old 03-19-08, 07:26 PM
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    I'll post what I replied to in your email since this could work for someone in the future:

    There's a nationwide Fannie Mae approved program called "Flex" (Freddie Mac also has it, it's called "Gold" with them). It lets you do 100% financing. There's also a reduced-PMI version of it called MyCommunity (or HomePossible) which is the same thing, but available only to average-or-below income households.

    You can do either of these 100% programs, get hit with the 95%, and still do the financing as planned. I understand that you don't want to deal with Countrywide (or rather, that specific idiot who had no idea what they were doing), but this should be portable to basically any lender.

    Here are, for example, MGIC's guidelines for the restricted market. Note you need to show/prove income and assets.
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