New Amendment: Illinois Landlord & Tenant Act

Effective January 1, 2012  For A and N Realtors, Investors, and Landlords: An amendment has recently passed to the Illinois Landlord and Tenant Act which creates a new Section 765 ILCS705/15 "Changing or rekeying of the dwelling unit lock." This New law requires most Cook County Landlords to change locks with every new tenant. If the landlord does not comply with this new rule, which will take effect January 1, 2012, then that landlord may be liable to the tenant for damages sustained because of stolen property by someone with the old tenants' key. MORE INFO HERE

A and N's Home Buyer Tips: Rate Shopping

Tips for Serious Mortgage Shoppers

• Get Educated  Borrowers should know terminology and mortgage basics before they shop.

• Know Your Credit Score   Addressing any issues on your credit report prior to applying for a loan will allow you to take advantage of more desirable mortgage rates and products.

• Shop Your Product Options  Though conventional loans are typically the most desirable, an mortgage insured by the Federal Housing Administration (FHA) may be more feasible.

• Know The Market Trends  Mortgage rates adjust daily. If you find a low rate on a loan you like, consider getting a rate lock. 

I have been receiving a lot of questions about FHA Mortgage Insurance Premium, Here are Some Answers

FHA mortgage insurance is similar to the private mortgage insurance (PMI) required for conventional mortgages with down payments below 20%, but key differences exist:

Up-front Fees: 1% up-front fee due at closing.

Rate: For fixed rate loans, there is an annual premium of 1.1% to 1.15% of the loan amount per year, divided over 12 months. Variable term MIP rates are 0.25% to .50% per month for 15 year or shorter-term loans.

Removal: FHA MIP is mandatory for the first five years of loans with terms more than 15 years (even if your loan balance reaches 78% of the original home value or sales price. PMI premiums can often be removed if the loan balance is below 80% of current market value. Conventional loans automatically remove PMI when the loan balance falls below 78% of the loan amount.

Exceptions: If you have a loan term of 15 years or less and put down 10% or more of the sales price, the MIP will be cancelled after the loan balance falls to 78% (of the original sales price, or the original appraised value, whichever is less). 20% down on a 15-year loan cancels PMI altogether.
How the MIP Affects Your Loan Decision? Considering that PMI payments do not go towards the principle, or add to the value of the home, most borrowers would choose to avoid paying PMI altogether.

However, It's hard to avoid paying PMI without putting 20% down. IF you have good credit history, and the money to put 20% down, then a conventional mortgage is probably better for you as PMI would automatically be lifted. However, if the down payment is a family loan or a gift, you may not qualify for a conventional loan even with 20% down. In that case, an FHA loan with MIP may be your only option, if you cannot afford the higher payments of a conventional 15-year mortgage.

Call A and N Mortgage 773-305-5626 for any more questions!

The Importance of Customer Service and Referrals in the Mortgage Business

Sr. Mortgage Consultant Mike McNamara

FHA -- Fewer Home Approvals

The Federal Housing Administration suffered a 27% drop in market share from fiscal 2010 numbers. Department of Housing and Urban Development numbers show that while FHA refinance volume has increased by 9% since August, the 12% drag on purchase production has hurt the overall numbers in September vs. August. Coupled with this drop in monthly productivity has been a 30 basis point (or 0.3%) increase in delinquency in comparison to August numbers.  


A statistically significant number for the Chicago market specifically is the 13% drop in condominium closings, not surprising, as condominiums have been consistently falling out of favor due to the elimination of spot-approvals, and increased strictness of conditions that have been enforced since the housing bubble burst.
And while FHA loan turn-times remained at a steady 5.9 weeks average from application to closing, it is an overall improvement from the 6.8 week average turn times at this time last year.

What this data shows is that while FHA loans are a solid product, the market for them has been deteriorating, with the expectation that this deterioration will continue for the forseeable future.

The FHA Mortgage Insurance Premium

FHA mortgage insurance is similar to the private mortgage insurance (PMI) required for conventional mortgages with down payments below 20%, but key differences exist:

Up-front Fees: 1% up-front fee due at closing.

Rate: For fixed rate loans, there is an annual premium of 1.1% to 1.15% of the loan amount per year, divided over 12 months. Variable term MIP rates are 0.25% to .50% per month for 15 year or shorter-term loans.

Removal: FHA MIP is mandatory for the first five years of loans with terms more than 15 years (even if your loan balance reaches 78% of the original home value or sales price. PMI premiums can often be removed if the loan balance is below 80% of current market value. Conventional loans automatically remove PMI when the loan balance falls below 78% of the loan amount.

Exceptions: If you have a loan term of 15 years or less and put down 10% or more of the sales price, the MIP will be cancelled after the loan balance falls to 78% (of the original sales price, or the original appraised value, whichever is less). 20% down on a 15-year loan cancels PMI altogether.

How the MIP Affects Your Loan Decision? Considering that PMI payments do not go towards the principle, or add to the value of the home, most borrowers would choose to avoid paying PMI altogether.

However, It's hard to avoid paying PMI without putting 20% down. IF you have good credit history, and the money to put 20% down, then a conventional mortgage is probably better for you as PMI would automatically be lifted. However, if the down payment is a family loan or a gift, you may not qualify for a conventional loan even with 20% down. In that case, an FHA loan with MIP may be your only option, if you cannot afford the higher payments of a conventional 15-year mortgage.

A and N's Home Buyer Tips: Get the Best Refi Rates

• Improve Credit - If you're a homeowner with great credit and plenty of equity, odds are those lower rates are within your reach. But if your score is less than desirable, work at improving it by paying all of your bills on time, paying down your credit card debt, keeping your credit lines open and increasing your credit limits.        

• Loan-to-Value Factor - To calculate your loan-to-value ratio, divide the amount you want to borrow by the current value of your home. If your LTV ratio exceeds 80 percent, you may have trouble qualifying for a refi.

• Short Term = Savings - Paying your loan off in a shorter period of time is not only a surefire way to save money over the life of your loan, but it is also a way to obtain an attractive rate on your mortgage.

• Opt to Pay Points - Buy down your loan's interest by paying points. A point is equal to 1 percent of your loan amount. Those buyers who opt to pay more points when refinancing are often  able to acquire lower interest rates on their loan. This could mean significant savings over the life of the mortgage. 

Is Mortgage Fraud on the rise even with the new Fannie Mae requirements for QC?

While commercial loan origination and median home prices have been trending downwards, mortgage and property fraud rates have been steadily increasing, up 75% from pre-recession peaks. According to the CoreLogic Fraud Index, $12 billion worth of originated loans were found to be fraudulent in 2010, and while the total for this year is expected to be around $7.4 billion, the rate of mortgage fraud remains constant due to the currently contracting revenues of the mortgage business. 

In all, these fraudulent mortgages could carry a price tag of up to $375 million a year for lenders. However, also according to the CoreLogic Fraud Index, mortgage fraud has taken on a new identity, with the traditional identity and employment fraud rates falling a combined 56% from their 2010 levels. 

Current market conditions- distressed and depreciating properties, as well as overwhelmed loan servicers scrambling to mitigate growing losses following the mortgage bubble’s collapse in late 2008- have proven to be strong catalysts for the growth of property, occupancy, and debt fraud in a time when US regulators are watching the mortgage business more closely than ever. 

Further examination of CoreLogic’s data have also show higher fraud rates in the Midwest and Northeast, with Chicago receiving the top national ranking where the risk of mortgage fraud is over 30% of the national average. Furthermore, Suspicious Activity Reports filed by large lenders was 70,472 in 2010, up from 67,507 in 2009. However, it is important to note that while SAR reports are increasing, this increase may show a growing trend of due diligence and stricter compliance with mortgage laws following the housing bubble’s collapse in late 2008.

Stats cited from http://mortgagedaily.com

Tax Bill Time

Cook County has recently released the tax bills.  CHECK THIS BILL TO MAKE CERTAIN THAT YOU ARE RECEIVING YOUR HOMEOWNER EXEMPTION.   This simple step can save you anywhere from $500 to $1,000 a year. Who pays this? The tax bill is either paid by your lender or if you do not escrow you must send in the payment direct to the Cook County Treasurer's Office or you can check on their website which local banks accept payments.    How to check? Cook County has set up a website where you can check online if your tax bill has been paid and if you are receiving your homeowner exemption.   You can also confirm your mailing address and ensure the correct name is on your tax bill.

Where to check? www.cookcountytreasurer.com The top right hand corner has a section to click for "payments," you can check the status of your payment and also make sure you have your home owner's exemption.  You will be required to give your PIN # which is on your tax bill.  What if I'm missing info?  If you do not have the information you need please feel free to contact your A and N Mortgage Consultant at any time.

The Importance of Home Inspection

There are several reasons to inspect a home before purchasing.

• Safety -A home inspection can protect you, the buyer, from any safety issues like carbon monoxide, radon and mold, which is quite common in foreclosed and short sale properties.

• Option to Withdraw -Anyone who can recall a popular Tom Hanks flick, The Money Pit knows that a quality home inspection prior to purchase could save you thousands of dollars (not to mention your sanity). As soon as the deed is transferred, you no longer have the option to walk.

• Important Negotiating Tool -Not only does a home inspection report provide the buyer peace of mind, it also presents an opportunity for the buyer to request repairs, a price reduction, or even a credit from the seller.

• Forecast Future Costs -A home inspector can often times approximate the installation age of major systems and appliance in your home, such as the roof, heating, cooling and the water heater. Knowing the shelf life of certain systems and appliances can potentially save you thousands of dollars down the road.

Should Banks Maintain Foreclosed Homes?

See our own Neena Vlamis interviewed on Fox News speaking to this hot topic.

Should Banks Maintain Foreclosed Homes?: MyFoxCHICAGO.com

How do I know if the Investment Fund is on the right track?

I have been asked a lot lately: "How do I know if the funds I've picked are on the right track?"

The answer is to review the performance of the fund with its "benchmark index".  If it has diverged substantially in the wrong direction immediately call your financial advisor. If you don't have a financial planner please contact me so that I can give you a reliable referral. 

What Does 25 Percent PMI Coverage Actually Mean

Question?   What does 25 percent PMI coverage actually mean
Answer:  25 percent coverage actually means that the MI company will pay out 25 percent of the loan amount and total expenses to the lender when a property goes into foreclosure (the file is of course scrubbed for fraud first)
The average MI paid claim is 51,000 dollars.

The government is looking to get rid of Fannie Mae and Freddie Mac. What? And go back to real common sense underwriting????

Fannie Mae and Freddie Mac are publicly traded companies.

Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) were taken over by the government in 2008 after billions of dollars in losses and years of mismanagement.

Fannie was created as a federal agency in 1938 and chartered by Congress in 1968, followed by Freddie in 1970, to increase access to home loans. But they also are publicly traded corporations and -- before their taxpayer bail out -- had a duty to maximize shareholder return.

Those two, divergent missions were criticized as a "fundamentally flawed" business model by the Financial Crisis Inquiry Commission, which was created by Congress to examine the causes of the economic crisis that began in 2007.

Fannie and Freddie loosened underwriting standards leading up to the financial crisis, buying and guaranteeing riskier loans and ramping up purchases of mortgage-backed securities to please Wall Street analysts and "ensure generous compensation for their executives and employees," the commission determined.

With the housing market in turmoil in 2007 and 2008, Fannie and Freddie reported billions of dollars in losses. They were placed in conservatorship under the Federal Housing Finance Agency in September 2008. Since then, the Treasury Department has provided $169 billion to cover their losses (with re payments the net cost to taxpayers is $141 billion). The total could rise to $363 billion, the FHFA said. Other estimates put the total closer to $390 billion.

Still, senior executives at the mortgage giants continue to receive multimillion-dollar salaries. The top six executives received a combined $35 million in compensation over 2009 and 2010.

They are paid as if they are risk takers when really the government is taking the risk!

Fannie and Freddie's future is uncertain right now.

The Obama administration and Republicans in Congress agree that Fannie and Freddie should be. In housing. abolished. In February, President Barack Obama proposed gradually phasing them.