In mid-May 2009, the U.S. Department of Housing and Urban Development (HUD) launched a program that would allow federally approved lenders to offer bridge loans to cover closing costs for borrowers who take the 2009 First-Time Homebuyer Tax Credit and who use financing backed by the Federal Housing Administration (FHA). These loans allow buyers who are eligible for the credit to apply those funds towards their downpayments and closing costs, using the credit as collateral. Once buyers receive the credit after filing their 2009 tax returns, the money will then be used to repay the bridge loan.

Due to considerable challenges in making these loans widely available, few lenders are currently offering these bridge loans. However, there are still many other funding sources to explore, including:

1.State Housing Finance Agencies
2.Local Governments and Nonprofit Agencies
State Housing Finance Agencies

Determining whether your state has a program

As of mid-2009, more than a dozen state housing finance agencies (HFAs) were offering bridge loans to prospective buyers, and many more were planning to do so. Currently, the following states have programs in place: Colorado, Delaware, Idaho, Illinois, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Tennessee, Texas, and Virginia.

To determine whether or not your state has begun offering these loans, you can:

•• Find your state’s HFA phone number on the National Council of State Housing Agencies’ (NCSHA) member list.
•• Consult the NCSHA’s list of HFA’s offering bridge loans.
If your state offers these loans, information should be available on the state’s HFA web site, which should be listed on one of the pages above.

Things you should expect from a state HFA advance loan

Although state HFA bridge loans differ from state to state, here are some typical characteristics

•• Buyers will need to make a minimum down payment from their own funds—probably approximately $1,000.
•• A local lender approved by the HFA will need to originate the loan, since HFAs themselves do not originate loans.
•• Buyers will use HFA-backed financing for their mortgages.

Other things to note about HFA bridge loans

•• Some are interest-free, others are not. So be sure to check with your lender.
•• HFAs have limited funds to devote to these bridge loans, so they are often made on a first-come, first-served basis.
Applying for an HFA loan

Since this financing often includes a below-market interest rate, it requires borrowers to meet eligibility criteria—often these include being a first-time buyer, and meeting income requirements. For the bridge loans, there’s a good chance the criteria will be similar to what’s required for the tax credit.

Local Government/Non-Profit Associations

If your state HFA does not offer loans, the staff may be able to direct you to local nonprofit organizations that do have programs—if any exist.

Another good place to start a search is NeighborWorks, a national nonprofit which maintains a list of more than 200 local affiliates that provide housing assistance. Each affiliates’ loan program will be different, so buyers should be sure that the organization offers bridge loans repayable with the tax credit, and that they understand the underwriting standards and loan terms.

FHA-Approved Lenders

If you are unable to identify other sources of funding, you may be able to obtain loans from FHA-approved lenders. Although as of mid-2009 many lenders had not yet begun offering these loans, it is possible that more will launch bridge loan programs before the credit expires.

Unlike loans from state and local agencies or nonprofits, the bridge loans provided by private, for-profit FHA-approved lenders must be structured in the form of a personal loan or line of credit. These loans are collateralized by the tax credit and cannot be structured as a second mortgage.

Also, although FHA allows you to use the bridge loan to cover closing costs or to buy down your interest rates, you can put it towards the down payment only after you’ve covered the 3.5 percent minimum that is required on any FHA loan. Therefore buyers will need to contribute the 3.5 percent minimum down payment themselves or find another funding source to cover it. However, buyers should be aware that seller-funded down-payment programs are not permitted to be used.

HUD provides complete details in Mortgagee Letter on “Using First-Time Homebuyer Tax Credits”. However, since individual FHA-approved lenders will be making the loan, actual loan terms will vary. At a minimum, though, the bridge loan must meet certain restrictions, which are intended to eliminate fraud or ensure that borrowers do not get in over their heads. Restrictions include:

a. Loans can not result in cash back to the borrower

b. The amount can’t exceed the amount required for the down payment, closing costs, and prepaid expenses

c. Monthly repayments must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.

d. Payments must be deferred for at least 36 months to not be included in the qualifying ratios.

e. There can be no balloon payment required before ten years.

-Information provided by: The National Association of Realtors

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Even the most dyed-in-wool Democrat has to admit that the major promise of Nancy Pelosi and company in 2006, that is the promise to rid D.C. of the “culture of corruption,” has been utterly and completely broken.

And despite Barack Obama’s promise to bring change to D.C., he only brought with him the business as usual Chicago-politics style.

Take for example Senator Chris Dodd (D-CT). He is in deep trouble thanks to some whistle-blowers who have exposed him. But, contrary to the campaign promises of 2006 and 2008, the Dems are taking no action to get rid of the corruption that Dodd represents.

Michelle Malkin has this:

And what does Obama do in response to this evidence of corruption? Read on:

So far, Obama has not withdrawn his support.

But it isn’t just Dodd that is a problem. Many Democrats have their own corruption issues, none of which are being addressed by a president who made a campaign promise to address such things.

More:

And let’s not forget Tim Geithner who failed to pay taxes.

The Democrats, rather than nobly standing up to the corruption in D.C. (including that within their own party) are instead hypocritically engaging in the very corruption they promised to fight!

Obama, Pelosi, Reid and other Democrats have transformed the “culture of corruption” into their own “culture of corruptness.” Dems, instead of draining the cesspool, have jumped in and started splashing around.

You can access the complete column on-line here:

Dodd And Obama: Corrupt Birds Of A Feather
Michelle Malkin
TownHall.com
July 31, 2009

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Newsletter-Chrisman, Rob (excerpt)

My son was flipping through the channels last night and asked me, “Did you hear about the new giveaway on Oprah this week? Oprah gave everyone in her audience a free Chrysler dealership.” I told him to keep his day job.

During the Civil War President Lincoln was being heavily criticized for military blunders. In 1862 he wrote, “If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know how – the very best I can; and I mean to keep doing so until the end. If the end brings me out all right, what is said against me won’t amount to anything. If the end brings me out wrong, ten angels swearing I was right will make no difference.” Ben Bernanke keeps that statement on his desk – interesting.

NO Video today rates went back down 30 yr fixed is at 4.50% at no cost

JPMorgan Chase & Co. is pulling back on its mortgage operations in Massachusetts, closing offices and reducing its headcount throughout the region. Chase, apparently, will remain active in the area but also continue to focus on their “depository footprint” where it has a banking retail presence. Six of seven state offices are expected to be closed, as was a Rhode Island office in December. http://www.bostonherald.com/business/general/view/2009_05_19_JPMorgan_Chase_to_cut_Massachusetts_mortgage_offices/

Other news:
Mortgage applications, according to the MBAA, rose 2.3% for the week ended May 15. The refinancing gauge was +4.5%, but purchases were -4.4%.
Regions Financial, which has received $3.5 billion of TARP money but was told by stress tests that it needs to raise more capital, said it plans to raise $1.25 billion through stock offerings, half of the sum that federal regulators told it to raise to withstand a potentially deep recession. The public offerings include $1 billion of common stock and $250 million of preferred shares automatically convertible into common stock.
Toll Brothers, currently the largest U.S. builder of luxury homes, saw its second-quarter revenue fall 51%. Based in Pennsylvania, they are the second-worst performing U.S. homebuilding stock this year having lost more than a third of its value since 2006.

On Monday night the House voted in favor of legislation that will give federal authorities more tools to combat mortgage fraud and create a commission to examine the financial crisis. It would authorize $490 million over two years to hire fraud prosecutors, increase enforcement actions and add funds to the Secret Service and Housing and Urban Development Inspector General. It also allocates funds to the Postal Inspection Service and sets up a commission of outside experts with subpoena power to examine the financial crisis and make recommendations. It also creates a bipartisan commission of experts with authority to review the causes of the economic situation and recommend changes.

In other Washington DC related news, Fannie Mae announced plans to securitize its holdings of mortgages that are not already packaged, into bonds. Per one trader, this helped fuel the issuance of $55 billion this month of debt backed by “seasoned” loans. Fannie’s plan is to take $256 billion of its single-family whole loan portfolio and $108 billion of multi-family loan portfolio and securitize that as well. Let’s hope that there are buyers out there! Speaking of buyers, this market is very, very quiet. “Dead in the water” as we used to say on the trading desk. The 10-yr seems happy around 3.23%, and mortgage security prices are about unchanged from Tuesday afternoon.

I am pretty good about giving people advice on careers. I tried selling real estate but I found my career listing. So I then tried mortgages but that just did not rate. Finally I tried doing appraisals but that was incomparably boring.