Recently I wrote an article titled, “Buying A Home? Down Payment Tips You MUST Know!” That article covered the basics of what to do and what not to do when it comes to documenting a home buyer’s assets.

Last month I processed two files for which proper documentation of assets were extremely burdensome and time consuming. to properly document assets. Mind you, the difficulty was not only for me, the processor, but for the home purchasers as well. A lot of the hassle could have been easily avoided had the home buyers worked with the loan originator to ensure funds were being managed properly.

Here I’ll lay out what occurred with the first of these two files, what resulted from those actions, and what could have been done to avoid the issues.

Names have been altered for privacy concerns.

If you're considering purchasing a home soon, it is critical to understand the documentation requirements to which lenders are subjected in today’s lending environment. Hopefully, this information will save you a lot time and grief as it pertains to the documentation of your down payment monies (referred to as "assets" by your lender).

In light of August, 2014 changes made to Fannie Mae’s mortgage loan waiting policy for borrowers who have experienced a short sale, we felt it would be useful to review the mortgage loan interval qualifying guidelines following a financial hardship event for the most popular mortgage loan programs.

Since employees might incur a wide variety of expenses related to their job, this article will cover only the following broad categories of tax-deductible job expenses

There are potential positives in disputing accounts. For example disputing a credit account that is incorrectly reporting negative information and successfully removing that from your credit account will typically boost FICO scores. However the dispute must work through the process in order to remove the negative information and this could potentially delay the loan process.

Why a Veterans Affairs (VA) Loan? Among other things, a VA home loan can be used to:

• Buy a home or a condominium unit
• Build a home
• Simultaneously purchase and improve a home
• Buy a manufactured home and/or lot.

Currently, banks are requiring large down payments for many types of loans, putting home ownership out of reach for many prospective buyers.  A VA loan still allows the borrower to buy a home, up to a loan amount of $417,000, or even higher in designated high-cost areas, with no money down.

Some Ways You Can Tell Your Information May Have Been Stolen

• You receive calls about debts that aren’t yours
• You receive bills that you know you did not incur
• Bills or statements you normally receive don't show up
• You see withdrawals from your bank account that you didn't make
• Your checks don't clear when there should be sufficient funds to cover them
• Your checks are refused by merchants
• Unfamiliar accounts or charges appear on your credit report
• You are notified by the IRS that more than one tax return was filed in your name, or that you have income from an unknown employer
• You receive medical bills for services you did not receive
• Your health plan rejects your legitimate medical claim because their records show you’ve reached your benefits limit
• A health plan won’t cover a claim because you are being billed for a condition your records don't show you have
• You get notice that your information was compromised by a data breach at a company where you do business or have an account.  When the organization that lost your information lets you know about the breach, they should explain your options.

The ATR has added another layer of responsibility on lenders above and beyond meeting guideline-specific program requirements. ATR has eight specific underwriting factors all lenders must consider on residential mortgage loans. That’s an important distinction, as it adds a layer of lender responsibility previously not there. For example, years ago Fannie Mae and Freddie Mac were purchasing loans that contained very little income or asset documentation, these were often referred to as “liar loans.” If Fannie Mae and or Freddie Mac decided to loosen guidelines, lenders were still required to meet ATR rules. So regardless of any of the loan purchasers’ or guarantors’ documentation desires, the overarching federal rule dictates underwriting factors and subsequently the documentation necessary to meet the law’s requirements.

Background

Effective January 10, 2014, the Consumer Financial Protection Bureau (CFPB) amended Regulation Z, which implements the Truth in Lending Act (TILA). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan.  The amendments generally require creditors to make and document a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for "qualified mortgages" (QM).

This article consists of excerpts and other information from the Federal Register / Vol. 78.

Background

During the years preceding the mortgage crisis, too many mortgages were made to consumers without regard to the consumer’s ability to repay the loans.  Loose underwriting practices by some creditors — including failure to verify the consumer’s income or debts and qualifying consumers for mortgages based on ‘‘teaser’’ interest rates that would cause monthly payments to jump to unaffordable levels after the first few years — contributed to a mortgage crisis that led to the nation’s most serious recession since the Great Depression.  In response to this crisis, in 2008 the Federal Reserve Board (Board) adopted a rule under the Truth in Lending Act which prohibits creditors from making "higher-price mortgage loans" without assessing consumers' ability to repay the loans.  Under the Board’s rule, a creditor is presumed to have complied with the ability-to-repay requirements if the creditor follows certain specified underwriting practices.  This rule has been in effect since October 2009.

Many people will be receiving good-sized tax refunds when they file their income taxes for 2013.  Saving enough money to cover the down payment on a home is often the primary stumbling block when people want to become homeowners.  With mortgage rates at or near record lows, it may make financial sense for first-time borrowers to use their tax refunds as a down payment to purchase a home that often carries lower monthly mortgage payments than what they pay in rent.  It also may make sense for people who are currently homeowners to use their tax refunds to enable them to upgrade to other homes.

Although FHA loan originations have recently declined, HUD issued Mortgagee Letter 2013-24 on August 15, tightening (with the stated purpose of clarifying and amending previous guidance) FHA borrower restrictions effective with all case numbers assigned on or after October 15, 2013.  This guidance applies to all FHA programs with the exception of non-credit qualifying streamline refinances and the Home Equity Conversion Mortgage.

Many people have been hurt by the economy over the past few years.  Most have had their credit damaged and many have had to declare bankruptcy, do a short sale of their home, a foreclosure, pre-foreclosure sale, or a deed in lieu of foreclosure.

Most people mistakenly assume that the company to which they make their monthly mortgage payments to actually owns their loan. This is rarely the case. To understand why the recipient of your payment is unlikely to be the owners too let us define a few items and roles.

Regardless of whether or not you are planning to make a major purchase (home, vehicle, home furnishings, etc.) in the immediate future, it is advisable to keep your credit score as high as possible.  Although there are sometimes ways in which you can obtain your credit score without incurring a charge, in general, obtaining your actual score costs something in the neighborhood of $10.  All consumers are eligible however, to obtain one free credit report (less the credit scores) from each of the nationwide consumer credit reporting companies (Equifax, Experian, and TransUnion) every 12 months.

Early in 2013, the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) announced changes that would be made to the FHA mortgage insurance policy, beginning on April 1, 2013. Changes were made to both the mortgage insurance premium policy and the length of time those policies remain in effect.

In February, 2013, Americans bought existing homes at the fastest pace in three years, as mortgage interest rates, remaining near record lows, continued to drive a housing market revival.

The median forecast of 77 economists surveyed by Bloomberg for existing-home sales called for an increase to a 5 million pace.   This was supported by data from the National Association of Realtors, which showed that purchases increased 0.8 percent to a nearly five million annualized rate, the most since November 2009.

As most of us are already aware, homeowners get significant tax breaks that are not available to renters; however, tax laws are continually changing.  While accurate at the time of this writing, it is critical that the taxpayer verify the information provided herein with either the Internal Revenue Service or an accounting professional for advice on your particular tax situation.

Mortgage interest rates are still near record lows, and home prices are still well off the peak prices of just a few years ago, so if you do not currently own your own home, now is an excellent time to become a homeowner.  

Housing Starts
Housing starts rose to their highest rate in more than four years in October of 2012.  U.S. builders started construction last month on the most housing units since July of 2008.  The Commerce Department said that builders broke ground on homes in October at a seasonally adjusted annual rate of 894,000. That's a 3.6 percent gain from September.  The median forecast of 82 economists expected groundbreaking to slow to an 840,000 pace.  Housing starts are 87 percent above the annual rate of 478,000 in April of 2009, which was the recession low, providing more evidence that the housing market has decisively turned around after an unprecedented collapse that landed the economy in its worst recession since the Great Depression.