Fannie Mae Introduces Innovative Solutions for Borrowers with Student Loan Debt

Innovations Help Borrowers Pay Down Student Debt and Overcome Debt Related Obstacles When Buying a Home

Aleksandrs Rozens

202-752-7916

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced new policies that will help more borrowers with student debt qualify for a home loan. These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers. The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

Innovative Solutions for Making Homeownership Affordable for Borrowers with Student Debt 
Because there is rarely a “one size fits all” approach to this issue, the policies announced provide options to borrowers based on their individual circumstances:

  • Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
  • Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
  • Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.

 

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

- See more at: http://www.fanniemae.com/portal/media/financial-news/2017/student-loan-debt-6546.html#sthash.1iUGKuZd.dpuf

An FHA Loan Might Be the Product For You!

Directors Mortgage offers the Federal Housing Administration Loan (FHA) to our clients who may want a low down payment option with with flexible mortgage guidelines. The features of the FHA Loan include: 

  • Borrowers can purchase a home with ad own payment of as little as 3.5%
    • Zero out-of-pocket funds for down payment possible, using gifts/down payment assistance programs
  • Easier to use gifts for down payment and closing costs than with other loans
  • Flexible qualifying ratios means that you can buy more home
  • May be assumable by the buyer, if approved by the mortgage servicer
  • FHA offer leniency for borrowers with less than perfect credit
  • NEW! County loan limits have been increased!
  • Great option for first-time homebuyers or those looking to refinance
  • Federally insured to help borrowers purchase a home they would not otherwise be able to afford!

Ready to get the process started and get into your new home? Find the office nearest to you and contact us today!

Common VA Loan Myths

VA Appraisals take over a month.
Directors Mortgage just got a VA appraisal back in 6 days!
Note: each county/city has different VA appraisal turn times, however, a significant increase has been seen in most areas.

I only have one chance to use my VA loan.
Veterans can use their benefit multiple times throughout their life. Actually, there’s no limit!

I can only have one VA loan at time.
Veterans who currently have a VA loan may still have "remaining entitlement" to use for another VA loan. The VA does allow veterans to have two VA Loans at the same time, as long as the max entitlement is not exceeded.

VA loan benefits expire if they are not used.
No. Your VA entitlement doesn't expire and you can use as many times as you want. Your entitlement never expires. However, your Certificate of Eligibility may need to be renewed. We can help you obtain your current Certificate of Eligibility.

I’m only eligible for a VA loan if I have perfect credit.
VA Loans are more lenient than conventional loans when it comes to your credit history. Generally you’ll need a minimum 620 FICO score.

VA loan appraisals are a nightmare.
The VA appraisal isn’t terribly different from the average conventional appraisal and can go very smoothly, especially if you are pursuing a home in good condition. Each city/county has a different VA appraisal turn time, however we noticed a significant increase in most areas.

I can only use my VA loan to purchase a home.
VA loans can be used to refinance too and up to 100% of the home’s value in some cases!

Using a VA loan is a lengthier process.
There’s a lingering misperception that VA buyers are weighed down by bureaucracy and paperwork. The reality is greater automation and efficiency, and other improvements in recent years have helped the VA Loan Guaranty Program more than keep pace.

All Veterans are guaranteed a VA loan.
In order to qualify for a VA Loan there are specific service conditions each borrower must meet. To see if you meet these minimum requirements contact us for assistance in ordering your Certificate of Eligibility.

Surviving spouses aren’t eligible for the VA loan.
Qualified surviving spouses may be eligible for a VA loan and may be exempt from paying the VA funding fee.

You have to have a down payment to use a VA loan.
The VA loan is one of the few mortgages available that allows for a 0 down payment. Most qualifying service members who purchase within VA loan limits don’t make a down payment.

I can’t get a VA loan if I’ve had a bankruptcy or foreclosure in the past.
You may be eligible for a VA Loan two years after a Chapter 7 bankruptcy discharge; one year after filing a Chapter 13 bankruptcy; and two years following a foreclosure.

Join Directors Mortgage in honoring out Veterans who we waive our $895 underwriting fee for. We would love to serve your next VA buyer!

Directors Mortgage and USA Direct Funding named Top Mortgage Company in Northwest

National Mortgage Professional Magazine just released their list of America's Top Mortgage Employers and we are excited to announce Directors Mortgage and USA Direct Funding were named the 2nd best employer in the Northwest!

In 2016, we were also named the #1 medium corporate philanthropists by Portland Business Journal and #109 in annual gross revenue by Oregon Business. This caps off a very successful year for the company and we couldn't have done this without our wonderful team members that make Directors Mortgage a top mortgage employer in the Northwest.

 

 

Tax Deductible Items for 2016 Mortgages

Congratulations on your mortgage closing! Here is a general overview of some information that may be helpful to you and your CPA as you prepare your 2016 tax returns:

Points Paid on a Home Purchase in 2016

Closing Disclosure Page 2, Section A - If the origination charges on Page 2, Section A of the Closing Disclosure include points paid to your mortgage company in exchange for a lower interest rate, you can deduct those points in the year paid… even if they are paid by the seller. Other fees in this section (application, underwriting, processing, etc.) are NOT tax deductible. Only bona fide points are deductible if they are expressed as a percentage of the loan amount and paid in exchange for a lower interest rate.


Points Paid on a Mortgage Refinance in 2016

Closing Disclosure Page 2, Section A - If the origination charges on Page 2, Section A of the Closing Disclosure include points paid to your mortgage company in exchange for a lower interest rate, you can deduct those points in the following manner:

  • You can deduct over the life of the mortgage all points paid on the portion of the mortgage proceeds that were not used for home improvements (for example, if you refinance your mortgage to reduce your interest rate, but do not take any cash out for home improvements).
  • You can deduct this year all points paid on the portion of the mortgage proceeds that were used for home improvements (if you received cash-out and are using that cash-out for home improvements). Remember, any points paid on the portion of the mortgage NOT used for home improvements must be spread out over the life of the loan. For example, assume you refinance an old $200,000 mortgage into a new $300,000 mortgage and walk away with $100,000 to be used for home improvements. In this case, 1/3 of your points are fully deductible this year and 2/3rds of your points are deductible over the life of the loan.

As outlined above, other fees itemized in this section are NOT tax deductible.

Upfront Mortgage Insurance

Closing Disclosure Page 2, Section B - You can generally deduct upfront mortgage insurance on FHA and conventional loans over 84 months if you qualify for the mortgage insurance deduction. However, you may be able to fully deduct the VA funding fee and/or the RHS guarantee fee on your 2016 tax returns, if:

  • You qualify for the mortgage insurance deduction, and,
  • If your loan was guaranteed by the Veterans Administration or the Rural Housing Service.

Property Taxes (Actual and Pro-rated)

Closing Disclosure Page 2, Section F - Property taxes itemized in this section are generally tax deductible in the year they are paid. However, property tax escrows in section G are NOT tax deductible until they are actually paid by your mortgage company to the municipality (city, state, county).

Pre-paid Interest

Closing Disclosure Page 2, Section F - Mortgage interest is calculated in arrears. This means that your monthly mortgage payment actually covers the month that just passed. For example, your February payment covers the interest for the month of January, your January payment covers the interest for the month of December, and so on. Oftentimes, when you refinance a mortgage or buy a new home, you “skip” a month’s worth of mortgage payments. That is why you sometimes pay "pre-paid interest" or “daily interest charges” in Section F of the Closing Disclosure. These daily interest charges cover the interest for the current month. If your mortgage interest is deductible, then pre-paid interest that you pay in this section is also deductible (this will be included in the 1098 statement that you receive from your mortgage company).

Previous Year Points Not Yet Deducted

You may be able to deduct the remaining portion of the original points paid on an old mortgage if you refinanced that old mortgage in 2016. For example, assume you paid points on a refinance transaction 3 years ago. You probably were not able to deduct all the points you paid in the year they were paid. Instead, you had to spread that deduction out over the 30-year life of your mortgage. So, assume you’ve deducted 3/30ths of those points so far, and you refinanced your mortgage again in 2016. You can now deduct the remaining 27/30ths of those old points that you have not yet deducted.

Pre-Payment Penalties

A pre-payment penalty paid on an old loan would be deductible on your 2016 tax returns as long as the new loan was taken out with a different lender than the old loan.

Other Closing Costs

Closing costs not mentioned above are not tax deductible. However, they are added to your “tax basis” for purpose of calculating your capital gain when you sell the property. In other words, you may be able to reduce your capital gains tax (if applicable) when you sell the property in the future because your home purchase closing costs get added to your cost basis.

Distinction Between a Qualified Residence and an Investment Property

Everything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.


PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.

 
 
 
 


Information deemed reliable, subject to change, this is not an intent to lend. MLO#3240

Does "Dow 20k" Matter For Rates/Housing?

As the new year gets underway, news stories about the Dow Jones Industrial Average hitting the 20,000 level are hard to miss. Given that stocks and rates moved higher together after the election, it's fair to wonder how this correlation might affect rates and housing.

There's no one-size-fits-all approach to this complex issue, but there are a few easy observations.  First, let's address the conventional wisdom regarding stocks' and bonds' (the securities that drive "rates") correlation.  This is easy to test with a quick glance at the long-term chart.  We'll use the most quintessential benchmarks for stocks and rates: the Dow and the 10yr Treasury yield.  Remember, conventional wisdom says the blue and orange lines should be on top of each other, for the most part.

 

This chart crushes conventional wisdom!  It can be a bit of a surprise if you haven't seen a similar chart.  In fact, this makes it look like stocks and bonds move in the OPPOSITE direction in the long run.  Why would any other conventional wisdom even exist?  A shorter-term version of the same chart provides the answer:

So what's going on here?  How can stocks and bonds be telling such different stories depending on the frame of reference?  

The answer is simply that stocks and bonds do indeed tend to go through phases of high correlation in the shorter term.  The shorter the time frame, the more reasonable it is to expect correlation.  This fits with the conventional wisdom of investors moving money out of one sector and into another (i.e. "buy stocks, sell bonds!").

The correlation breaks down in the longer-term because rates are cyclical.  That means they tend to cycle in a confined range.  Even though that range is up for debate (after all, some countries have seen their 10yr rates drop below 0%), its cyclical nature is not.  No one expects the 10yr yield to break its ceiling from the early 80's--not even close.

Stocks, on the other hand, can theoretically maintain linear, or even exponential growth forever and ever. Only the most apocalyptic scenario would bring stocks back to early 80's levels.  To oversimplify the point, the 30 biggest companies in the US would have to lose 90% of their value.  Not even the most pessimistic forecasters would entertain such a possibility.  

Bottom line: stocks can keep moving higher over time if companies keep growing.  Rates, on the other hand, can only go so high before economic and monetary forces will act to bring them back down.  The big, unanswerable question is "how high will rates go this time around?"

Some say that the decades-long trend toward lower rates over, and the new long term trend will be toward higher rates.  Before you lose sleep over that, let's look at the scale of the problem.  The following chart will help.  The post-election rate spike is circled so you can see where it fits in, longer-term.

To be clear, the recent rate spike was absolutely abrupt, but several past rate spikes covered much more distance overall.  Additionally, the current rate spike hasn't even come close to definitively breaking the ceiling of the trend (the upper of the two parallel lines).  

That's not to say the trend won't break.  Naturally, if the trend is downwardly-sloped, and if I just argued that rates will hold a cyclical/sideways pattern in the longest of terms, the trend must be defeated at some point.

The only thing that's debatable is HOW that process will unfold: quickly and painfully, or slowly and tolerably?  Late 2016 rate movements were defending against a "quick and painful" scenario where Trump's new policies stoked the fires of economic growth and inflation (both bad for rates) which in turn would prompt the Fed to raise rates more quickly (thus adding upward pressure on longer-term rates like mortgages).  

The Fed confirmed that assumption in the release of their December meeting minutes this week, saying that rates could need to be raised more quickly to whatever extent new fiscal policies were successful in promoting growth and inflation.  But rates fell in response, suggesting markets already assumed as much, and that mid-December marked a near-term ceiling.

From here, it continues to be the case that we're waiting to see how Trump's policies evolve and how much of an effect they ultimately have on growth and inflation.  With December's highs hopefully behind us, rates are more likely to carve out a sideways range as they wait for the next major cue.  That range could be fairly wide, given the scope of the movement over 2 months.  

As long as the recent ceiling remains intact, the damage to housing markets will be relatively contained.  (Note: the previous newsletter had several charts showing the effect of 2013's rising rates on home sales, thus providing a baseline for the aforementioned "damage.")

"Pivot points" seen in the following chart can help us keep an eye on how rates are doing.  In general, breaking below these pivot points is good, but such breaks can also serve as cues for markets to push back in the other direction, as seems to have been the case this week when 10yr yields hit 2.34% and promptly bounced back to 2.42%.

Make the Most of Your Holiday Season

The first snow of the year always brings out the holiday spirit. The Pacific Northwest has everything to offer from extravagant light displays to Santa themed pub crawls. Here is a list of the best holiday events in your region.

Seattle/Bellevue

Snowflake Lane - You don't get the title "Most Festive Town in America" by The Huffington Post for nothing. If you haven't seen Snowflake Lane holiday parade, now is your chance! From November 25 - December 24, this spectacle invades downtown for a nightly show featuring toy solider drummers, exhilarating music and even snow.

Woodland Park Zoolight - This annual tradition brings alive one of the oldest zoos' in the country with over 600,000 LED lights. You'll get to see some of your favorite nocturnal animals at night and get your picture with Santa.

The Nutcracker - A timeless holiday classic makes its return to Seattle. The ballet has already received fantastic reviews from The Seattle Times and a must see this holiday season.

Bellevue Ice Skating - Re-live your childhood and lace up your skates with the family at the Bellevue ice skating arena. Free lessons, family skate nights and group parties are just some of the nightly events located at Bellevue Ashwood Park.

Kitsap County & Pierce County

Point Defiance Zoolights - Ride a camel, enjoy delicious treats or ride the carousal featuring animal displays such as hammerhead sharks and sea turtles. Bundle up and see masterpiece 3D animal designs.  

The Christmas Revel - Bring the family and friends for lively concoction of folk tradition and high art. This Christmas musical features gripping story telling with the regions best singing and dancing with holiday cheer.

Columbia Gorge/Hood River

The Polar Express - Your favorite holiday story comes to life with this once in a lifetime event. Your children get to wear their pajamas and embark on a journal to the North Pole. This train ride features dancing chefs serving cookies and hot cocoa with Christmas carols to get the holiday cheer flowing.

Skamania Lodge - All during the month of December, Skamania Lodge will be holding different holiday events for the entire family. You'll find everything from Gingerbread house building, art showings, holiday themed cocktail hour and more!

Oregon Coast

Wishes and Candles Holiday Concert - Hosted by the Central Coast Chorale, this year will be hosted at the Yachts Commons. Join them for a celebration of holiday cheer. Admission is free with a suggested $10 donation.

Dear Santa - This production shows Santa from various viewpoints from children of all ages. This family delight will have you laughing and making sure you're not on the naughty list! 

Willamette Valley

A Christmas Story - Based upon the hit movie, this production plays until December 18th at the Cottage Theatre. The Cottage Grove Sentinel recently gave the production a great review saying, "oodles of holiday spirit."

Santa n S'mores - Santa is coming to town to enjoy hot cider and coco with the family. Kids can make holiday gifts and a workshop making your holiday centerpiece. Finally, bundle up by the fire and enjoy some S'mores with Santa.

Central Oregon

Carriage Rides at the Old Mill District - Enjoy complimentary rides from Santa in his slay with Cowboy Carriage benefiting Kid's Center.

Winter Gala at Sunriver - This annual winter gala promises an elegant evening with fine dining, live entertainment, dancing and networking. A silent auction will be held with all proceeds going to Sunriver Women's Club. 

Portland

SantaCon - The 4th annual SantaCon will start at Splash Bar or Kells Irish Pub. All proceeds from the event will go to the Portland Police Sunshine Department. The theme this year is "Festival of Lights" so dress up in your favorite holiday gear and help light up the holidays.

Festival of Lights at The Grotto - The Grotto's Christmas Festival of Lights is the largest Christmas choral festival in the world. With nearly 160 holiday concerts, this family oriented holiday tradition is sure to spread holiday cheer in Portland.

Holiday Ship Parade - For 15 years, the Willamette river has been home to the holiday ship parade. More than 60 boats have signed up this year promising a new twist on a holiday tradition. 

US Olympic Alpine Ski Racer Jackie Wiles joins the Directors Mortgage family

At Directors Mortgage we proudly support local causes, organizations and people that show their commitment to the community and members.

We are proud to announce a new sponsorship with Oregon native and member of the Women’s U.S. Ski Team, Jackie Wiles.

Jackie Wiles announced her arrival in a big way during the 2013 season. She won the Nature Valley U.S. Alpine Championship downhill title at the U.S. Ski Team Speed Center hosted at Copper Mountain. She then won it again in 2014 and went to her first Winter Olympics in Sochi, Russia. Now a full-fledged member of the women’s World Cup speed team, Jackie hopes to continue her success in 2017 during the Alpine Skiing World Cup.

Last year, Jackie joined teammate Lindsey Vonn as the first-ever athlete ambassador for the Lindsey Vonn Foundation's. "I’m really lucky that I have such a great teammate as Jackie Wiles,” Vonn noted. “She needed help to be able to support herself this season, so I personally gave her money to be able to ski this year and in return she is the first ambassador for the Lindsey Vonn Foundation.”

Through her relentless work ethic, love of the sport and commitment to excellence, Jackie has primed herself for a successful year with the U.S. Women’s Ski Team. She embodies our company principles: Caring, WOW Factor, Life Balance, Consistency, CANI (Constant & Never Ending Improvement) and Dedication that has allowed her to excel in the sport.

Follow Jackie on social media to keep up during her busy winter schedule. Good luck during the 2017 Alpine Skiing World Cup!

Facebook: https://www.facebook.com/jacquelinewiles

Twitter: https://twitter.com/JankyLilJ

Instagram: https://www.instagram.com/jankylilj/