During the last several years, regulations imposed on the mortgage industry have restricted the availability of credit to many borrowers. I am not saying that the industry should not be regulated, but rather, that the types of regulation that are put into place need to be sensible, and they need to be fair to the various players in the mortgage business.

The Federal Housing Finance Agency recently announced its plans to make more loans available for as little as a 3% down payment. This pledge sounds good, put upon closer review, it does not appear to be a game changer. There are plenty of low-down payment loan programs available, but it has become increasingly difficult for even well-qualified borrowers to access these programs.

While the housing market has seen improvement since 2008, and there are less underwater homeowners than there had been as recently as 2012, values are still not where they should be, in part due to the tough underwriting standards lenders are placing on files to ensure that they are compliant with federal regulations (that have nothing to do with a borrower’s ability to repay the loan).

Here are some additional reasons why loan originations will face downward pressure in the years to come:

1. Many homeowners refinance in 2012 and 2013 and have no need to refinance into today’s higher rates.

2. Many borrowers lack the equity needed to refinance.

3. Incomes have fallen 8.7% between 1999 and 2013, so it is harder for borrowers to afford mortgage costs.

4. Student debt levels are rising, which is making the qualification process more difficult because of the more strict debt-to-income regulations.

5. Existing home sales are down from 2013 levels, meaning that there are less properties to finance.

First Indiana Mortgage, LLC is a mortgage broker operating in the state of Indiana. Please visit our website at www.firstindianamortgage.com for a free rate quote, or to learn about the mortgage process.

During the last several years, regulations imposed on the mortgage industry have restricted the availability of credit to many borrowers. I am not saying that the industry should not be regulated, but rather, that the types of regulation that are put into place need to be sensible, and they need to be fair to the […]

Many times, potential borrowers wonder whether a broker or direct lender is the best choice while shopping for a mortgage. Here are some advantages of using First Indiana Mortgage:

• Because we have low overhead, we can offer lower rates that direct lenders.
• We receive a fixed compensation amount for each transaction, based upon a percentage of the loan amount, regardless of the rates that borrowers choose.
• We are required to undergo strict licensing and testing procedures.
• We have long-held partnerships with the lenders that we work with, and have good relationships with underwriters.
• We are responsive to your calls.
• We review the information borrowers supply, and oftentimes, we can resolve potential documentation issues before information is submitted to an underwriter.
• We realize that we are in a customer service oriented profession, and are committed to providing prompt, professional service.

Visit us at www.firstindianamortgage.com for a free rate quote, or to obtain additional information about our company and the services that we provide.

Many times, potential borrowers wonder whether a broker or direct lender is the best choice while shopping for a mortgage. Here are some advantages of using First Indiana Mortgage: Because we have low overhead, we can offer lower rates that direct lenders. We receive a fixed compensation amount for each transaction, based upon a percentage […]

The My Community Mortgage Program is a great low down payment alternative to FHA loans. The my Community Program, which is offered by Fannie Mae, is a conventional loan program that offers flexible underwriting standards, and lower monthly mortgage insurance rates to qualified borrowers, when compared to FHA financing.

First Indiana Mortgage offers the program, with as little as 5% down payment (or 95% LTV on refinances). Using the 5% down/5% equity scenario, based upon a $200,000 loan, FICO 650-699, the My Community Mortgage would save borrowers about $100 per month in mortgage insurance costs when compared to FHA financing.

To qualify for a My Community loan, you must meet certain income requirements, must not have other financed properties. To discuss the My Community Mortgage in more detail, reach out to Forst Indiana Mortgage ay 888/627-2002, or visit our website at www.firstindianamortgage.com.

The My Community Mortgage Program is a great low down payment alternative to FHA loans. The my Community Program, which is offered by Fannie Mae, is a conventional loan program that offers flexible underwriting standards, and lower monthly mortgage insurance rates to qualified borrowers, when compared to FHA financing. First Indiana Mortgage offers the program, with as […]

The Dodd-Frank Bill, implemented after the real estate crisis in 2008, sets the framework for how mortgage brokers are paid. Understanding the process may help borrowers to assess how there can be a variance in the rates offered for identical home loan products.

To provide a background, under these new regulations, borrowers receive a credit from lenders, expressed as a percentage of the loan amount, based upon the rate and program that they choose.  For illustration purposes, let’s suppose that a borrower is seeking a $250,000 refinance loan, has good credit, stable income and sufficient equity in the property. He approaches two mortgage brokers (Broker A and Broker B), and obtains different rate quotes from each, even though both brokers intend to send his loan to the same lender, XYZ Bank.

The Dodd-Frank Bill requires that lenders, in this case XYZ Bank, provide borrowers with a “credit” for each mortgage scenario, and that the credit must be reflective of a borrower’s specific circumstances, so that each borrower with the same credit, income, asset, and equity position be offered the same terms. For the purposes of this discussion, let’s use the hypothetical $250,000 loan above.

Under this scenario, Lender XYZ offers a rate of 4.25% for a 30 -year fixed mortgage, and provides a credit of $7,500 for the borrower to use to pay closing costs, prepaid interest, and to set up an escrow account for the future payment of insurance and property taxes. Under these circumstances, how can the rates offered by Broker A and Broker B be different?

Dodd-Frank requires that mortgage brokers set pre-determined compensation levels, based upon a certain percentage of the loan amount, for each loan that they originate. This lender compensation level is deducted from the lender credit, and the remaining funds go the borrower. Each brokerage sets its compensation level in light of the profit it intends to make on each loan, taking into consideration salaries, overhead, etc. So if Broker A has its compensation level set at 1% ($2,500 in this scenario) and Broker B has its compensation set at 1.5% ($3,750 in this scenario), a borrower would be better served to go with Broker A, and utilize the additional $1,250 to his benefit.

First Indiana Mortgage has set its compensation low to be in the position to offer its clients the lowest possible rates in the Indiana market. We encourage borrowers to shop their mortgage, and solicit written offers from mortgage providers. Visit us at www.firstindianamortgage.com to obtain a rate quote, or to learn more about the products and services that we offer.

The Dodd-Frank Bill, implemented after the real estate crisis in 2008, sets the framework for how mortgage brokers are paid. Understanding the process may help borrowers to assess how there can be a variance in the rates offered for identical home loan products. To provide a background, under these new regulations, borrowers receive a credit […]

The Fed recently confirmed that it would conclude its Mortgage Backed Securities purchases in October, 2014. While the Fed has been tapering its purchases recently, its exit from the MBS market will reduce demand, and drive the price of Mortgage Backed Securities down. As we know, interest rates and bond prices have an inverse relationship, so when bond prices go down, interest rates go up.

With that in mind, if you are in the real estate purchase market, or have an adjustable rate mortgage that need to be refinanced, then it is the time to lock your interest rate.

First Indiana Mortgage offers a wide variety of loan products, low rates, and superior service. Visit us at www.firstindianamortgage.com or call 888-627-2002

The Fed recently confirmed that it would conclude its Mortgage Backed Securities purchases in October, 2014. While the Fed has been tapering its purchases recently, its exit from the MBS market will reduce demand, and drive the price of Mortgage Backed Securities down. As we know, interest rates and bond prices have an inverse relationship, […]

This morning, I read that former Fed Chairman, Ben Bernanke, was unsuccessful in his attempt to refinance his mortgage, even though he commands fess of up to $250K for individual speaking engagements. He is quoted as saying: “I think it’s entirely possible [that lenders] may have gone a little bit to far on mortgage credit conditions . . .The housing area is one area where the regulation has not yet got it right.” I agree and disagree, and here is why.

Reportedly, Bernanke, who had earned nearly $200K per year as the Fed Chairman is now self-employed. For many years, lenders have required proof of income for self-employed borrowers in the form of two years of federal tax returns to document income stability, and that makes sense. Bernanke left the Fed less than two years ago, so it follows that he cannot document his income. These requirements are set by Fannie Mae and Freddie Mac for loans that can be sold on the secondary market, and, in my mind, do not qualify as “regulation” in the context of Bernanke’s statement.

Looking back a few years, the housing market crisis was fueled by lenders offering loans that required no income documentation, then packaging and selling those loans in the secondary market. From the outset, a reasonable person would have concluded that the borrowers, in many of these instances, would have difficulty repaying these loans, especially in an environment where housing prices were declining.

There was little regulation at that time regarding the types of products that lenders were offering, and by playing “hot potato” with these loans on the secondary market, lenders caused significant injuries to the economy as a whole. For a former Fed Chairman to insinuate that income documentation is a form of over-regulation misses the point.

The current state of regulation in the mortgage industry favors big lenders over smaller ones, and places a huge burden of compliance and disclosure on mortgage brokers, disproportionately. Unlike lenders, mortgage brokers are required to disclose all of their income to borrowers at the outset of the loan application process, and income is set as a percentage of the loan amount, no matter what interest rate is offered to a borrower. Big national lenders have a different set of rule, and are not subject to the same disclosure requirements.

Mortgage brokers can offer lower rates than lenders, because they generally are leaner, have lower overhead, and they set their pre-determined compensation rates low. Borrowers often times lose sight of the fact that, in most cases, the people that handle the loan conditions on any loan file have more experience than workers holed up in cubicles at national banks, and they have a vested interest in getting a loan submitted, approved and closed in a timely manner.

First Indiana Mortgage is a mortgage broker, and we encourage you to visit our website at www.firstindianamortgage.com

This morning, I read that former Fed Chairman, Ben Bernanke, was unsuccessful in his attempt to refinance his mortgage, even though he commands fess of up to $250K for individual speaking engagements. He is quoted as saying: “I think it’s entirely possible [that lenders] may have gone a little bit to far on mortgage credit […]

The FHA 203k Streamline loan allows homeowners and purchasers to combine repairs and home financing into one loan. The FHA 203k Streamline allows borrowers to finance the purchase or refinance of an existing home and make improvements or upgrades up to $35,000. $5,000 minimum repair costs required.

Examples of repairs:

• Repair, replace, and upgrade roofs, gutters and downspouts
• HVAC systems (heating, vacuum, and AC)
• Plumbing and electrical systems
• Flooring, exterior decks, patios, and porches
• Minor remodeling that does not involve structural repairs
• Interior and exterior painting
• Weatherization, including doors, windows, insulation, stripping, etc.
• Appliance purchase and installation (kitchen appliances, washer, dryer)
• Lead-based paint removal and stabilization
• Exterior wall re-siding
• Certain other improvements that are a PERMANENT part of the real estate*

Contact us at www.firstindianamortgage.com for additional details.

The FHA 203k Streamline loan allows homeowners and purchasers to combine repairs and home financing into one loan. The FHA 203k Streamline allows borrowers to finance the purchase or refinance of an existing home and make improvements or upgrades up to $35,000. $5,000 minimum repair costs required. Examples of repairs: Repair, replace, and upgrade roofs, […]

In Indiana, USDA Rural Housing Loans are a good way for a potential home buyer to obtain a 100% mortgage, with no down payment required. The program, which is insured by the US Department of Agriculture, sets reasonable maximum income limits for households wanting to obtain loans under the program, and, like FHA loans, requires both upfront and monthly mortgage insurance premiums.

Currently, the income limit for the Indianapolis Metro area is $79,000 for all income earners in the household, combined. You can assess the income requirements, per Indiana county by clicking here. In addition to the income requirements, the house that you want to purchase must be in an eligible area and meet certain minimum household standards. To see whether the home that you want to purchase is eligible for a USDA loan, check here.

There is no specific limit to the loan amount or purchase price, but you are generally capped at a debt-to-income ratio of 41%. The available rates are generally consistent with, or lower than, prevailing FHA rates, and the mortgage insurance premiums are affordable, and can be financed into the loan. Currently, USDA loans require a 2% upfront premium, and an additional 0.40% monthly premium; while FHA loans require a 1.75% upfront premium, in addition to a monthly mortgage insurance premium that can be as high as 1.55% (annually).

Using the scenario above, a home with a $100,000 purchase price can be financed with a 100% loan, plus the upfront mortgage insurance premium can be financed, bringing the total loan amount to $102,000. The monthly mortgage insurance premium would be $33.33.

The USDA loan must be used for the purchase or refinance of a primary residence, so investment properties and working farms would not meet the eligibility requirements of the program.

If you already have a USDA mortgage in place, it can be refinanced without any income or asset requirements, and there is no appraisal required.

If you are interested in obtaining details regarding a USDA loan for a purchase in the state of Indiana, contact First Indiana Mortgage at 888-627-2002.

In Indiana, USDA Rural Housing Loans are a good way for a potential home buyer to obtain a 100% mortgage, with no down payment required. The program, which is insured by the US Department of Agriculture, sets reasonable maximum income limits for households wanting to obtain loans under the program, and, like FHA loans, requires […]

The proposed Fair Credit Reporting Improvement Act of 2014 proposes to shorten the time that adverse credit information appears on individual credit profiles, which will lead to higher mortgage interest rates. Here is why:

Currently, adverse credit information will remain on credit reports for a period of up to seven years; under the proposed law, that period would be shortened to four years, and if a non-performing credit account is paid or settled, that account would be removed from the credit profile in approximately 45-days.

What this will do is encourage borrowers to default on loans, because there will be no consequences for not paying creditors back in full. Once the derogatory information is removed, presto, the potential borrower will look like a good credit risk. While the current credit scoring model is not perfect, it rightfully factors in the non-payment of debts, and is a model in which lenders can reasonably assess a potential borrower’s willingness and ability to repay debts.

Creditors will have no choice but to raise rates for high credit score borrowers (who currently receive better rates) to accommodate for the increased risk posed by the deadbeats who would now appear to be good credit risks. While legislators may mean well, surprisingly, this law does not appear to have been well though out.

If you are an Indiana resident searching for a mortgage, visit www.firstindianamortgage.com for a free, no obligation rate quote.

The proposed Fair Credit Reporting Improvement Act of 2014 proposes to shorten the time that adverse credit information appears on individual credit profiles, which will lead to higher mortgage interest rates. Here is why: Currently, adverse credit information will remain on credit reports for a period of up to seven years; under the proposed law, […]

It has been reported that national mortgage lenders slashed 19,000 jobs during the 2nd quarter of 2014, while non-bank mortgage employment number increased slightly during that same period.

First Indiana Mortgage competes against these national lenders for loans, and we often hear comments that potential borrowers are more comfortable using a big lender, such as Chase (which eliminated 11,500 mortgage jobs in 2014 Q2) and Bank of America (which eliminated 3,900 jobs) because of their perceived stability, even if these lenders are offering a higher rate.

What these employment numbers illustrate is quite the opposite of the stability that borrowers desire.  Borrowers need to realize that, with any lender or broker, it is the actual employees that handle your file that will make your experience favorable or unfavorable. When you obtain a loan with First Indiana Mortgage, you will always be working directly with a licensed loan originator, and your file will be handled by licensed employees from start to finish. National lenders do not have the same continuity, and with declining employee numbers, the experience and training level of the employees that would be handling a loan file is questionable.

So when you are comparing rates and programs, it is always important to determine your comfort level based upon the rate, and the level of service that you will receive. At First Indiana Mortgage we are committed to providing low rates and outstanding customer service. Visit our website at www.firstindianamortgage.com or call us at 888-627-2002 to obtain a rate quote or discuss available loan programs and options.

It has been reported that national mortgage lenders slashed 19,000 jobs during the 2nd quarter of 2014, while non-bank mortgage employment number increased slightly during that same period. First Indiana Mortgage competes against these national lenders for loans, and we often hear comments that potential borrowers are more comfortable using a big lender, such as […]