How are mortgages regulated?

Question

I hope this is a quick question, and I can get an easy answer.

I am buying my first home, and am waiting for a closing date. Our mortgage lady is aggravating me to no end. We have applied for a conventional rehab loan. When we ask if various things can be done, her standard answer is "not with a rehab loan".

Is there some standards or rules set for these loans by the FDIC, or are these just "rules" made up by the bank we are dealing with?

Any help would be much appreciated! Thanks!!

SUsan

Lynn Z · Answer

I read that Fannie Mae and Freddie Mac had about 40% of the mortgages in the US -- I know our local banks sell to them.  A lot of brokers also.

Filkins Susan · Answer

Loan amount is 56K; 41k purchase, 18k repairs, minus everything she says we have to have down/at closing.

Rate is adjustable every three years, but we plan to refinance before it adjusts. The interest rate is 5.87%. The loan is for both purchase and repairs combined.

I am not interested in the FHA 201k, as this place will not pass an FHA inspection, and I am not interested in them telling me I have to remove questionable paint, add stair railings, replace shaker siding shingles, blah blah blah.

If we repaired everything that FHA would want repaired we'd need another 20 grand.

Again, is there any "place" where we can see for ourselves what the guidelines and limits of this particular loan are?

Thanks!

Filkins Susan · Answer

The bank we are dealing with do all of their own loans. It is called Tompkins Trust Company.

It is a "profile loan" we were told today, and I guess they do make up their own rules for them as they go along.

Scott Miller · Answer

Checking FNMA's guidelines only makes sense if the originating lender intends to sell the servicing rights---even though I know very little about your circumstances, I can hazard an education guess about what I know about construction lending...

Call Indymac---that's who I think your lender is/will be.

Regards,

Scott Miller

Filkins Susan · Answer

Thanks Scott!

It was my error on the 201 vs. 203. I knew what it was, I just typed it wrong. Also, the 203 has strict requirements on WHO can do the rehab work, and we dont want to deal with those requirements.

The loan is not a Sallie Mae, SUNY mae, or Freedi Mac, or any of that stuff. Sorry if my spellings are not correct, but I'm sure you know what I am referring to.

Yes, our FICO scores are all high 700s. They just required us to show that we had 5% down, and closing costs in the bank regardless of how long its been there.

The appraisal came through at over 68k after repairs.

Scott Miller · Answer

Susan,

The FHA loan in question is called the 203k loan---will set that aside because of your stated reservations (other then lead paint removal, all improvements that would be required by HUD would be for energy efficiency).

Even in the absense of any details on your loan request, I suspect I know who your mortgage lady is using---just a couple of questions to see if my suspicions are correct:

- Are your FICOs in excess of 620?
- Were you required to have cash reserves in excess of 2 months (did the loan program require the equivalent of 2 months PITI [principal + interest + taxes + insurance] to be available and in your bank account)?

Regards,

Scott Miller

What is the anticipated property value after repairs have been completed?

Lynn Z · Answer

sounds complicated.  Most of our lenders won't touch a loan with rehab costs included so we've been accustomed to doing a construction loan at 7.25-7.35 (now probably 8.25) for 6 months to one year interest only (20 yr. amor.), half a point loan orig.  then refi (once finished) to include all closing costs, points etc. regardless of whether it's a home owner loan or an investor refi.

Regardless of the loans made, points etc. were always rolled into the loan over the past 15 years at least.  That's banks, mortgage brokers and the like.
If they require a year's property taxes and insurance to be paid, that's financed too.

You can query Fannie Mae Desktop Underwriter guidelines and read out their guidelines.  I think that is helpful..  Sounds like you got an awful lender.  Call her supervisor and see if what she's telling you checks out.

Filkins Susan · Answer

As I stated in the OP this is a "rehab loan" (as they call it), and it is a conventional loan. It supposedly requires 5% down, and only allows 3% seller concessions.

The only repairs we are doing is a major complete bathroom remodel, new sheet rock, window and door in the kitchen, new heating system, and 3k in repairs done to the electric.

Filkins Susan · Answer

Yes, for my primary residence.

Example:

"Can we finance some of the closing costs?"

..."Not on a rehab loan".

"Can we get the seller to pay any of the costs?"

...."Not on a rehab loan"

"I see you offer a no closing costs/no down loan?"

..."not on a rehab loan".

It seems to be this lady's standard answer.

Our loan is for 56k for the house plus repairs, and the appraisal came in (repairs considered) for 70k.

How can we confirm what is and isn't available on this rehab loan so that we dont have to feel like she is feeding us some generic "nope (cuz I'm too lazy to check)? Is it a bank rule? Is it an FDIC thing? Is there any way for us to verify this stuff?

Thanks!

Scott Miller · Answer

Firstly, there are rehab loans for primary residences that allow for the purchase price + rehab costs + up to 6 months of mortgage payments during rehab + closing costs to be rolled into the loan amount (and an allowance of 6% seller concessions too)...

As to your mortgage lady, she might; 1) not know, 2) not care, 3) not offer a rehab loan program that allows for these features (although highly unlikely).

Can you share the terms and conditions of the loan you are about to get from this individual---what type of loan program at what interest rate?  Is the interest rate fixed during the life of the loan or is it a two interest rate program (one for rehab and the final lock after its completed)?

What type of rehab do you intend to do---what is the estimated repair costs?

Tell me more about your loan offer...

Regards,

Scott Miller