MORTGAGES; New Lending Guidelines

CORRECTION APPENDED

NEW lending guidelines being rolled out by Fannie Mae will make securing a mortgage a lot easier for some borrowers but harder for others.

The rules, effective on Dec. 13, will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae, the government-owned company that sets lending standards and buys mortgages from lenders. (Freddie Mac is considering similar new guidelines, said Brad German, a spokesman.)

Previously, borrowers had to contribute a minimum 5 percent down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20 percent down: all that money could come as a gift.

Because many lenders now require a down payment of 10 percent or more, the new rules mean that borrowers will still have to come up with extra funds -- either their own or gifts.

Still, ''this is definitely going to help upgrade buyers and young couples who for whatever reason don't have enough money and are getting some from their families,'' said Edward Ades, the owner of Universal Mortgage, a broker in Brooklyn.

The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80 percent of the property's value. Also, there is a limit on the loan balance -- $729,000 in high-cost areas like New York City, and $417,000 in other areas.

Now, the not-so-good news.

Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower's gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.

The agency is also taking a harder look at payment histories on revolving debt. In the past, if a borrower missed a monthly payment, Fannie Mae ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratio. Now, buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Mr. Ades said that new hurdle could sink many potential borrowers with student-loan debt that has been deferred.

Susan A. Kreyer, the president of the New York Association of Mortgage Brokers, added that buyers who had bought big-ticket items through financing with delayed payments would also be affected.

In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios -- another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.

But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from five. ''That's a long time in this economy,'' Ms. Kreyer said. That change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae's automated underwriting systems next month.

Fannie Mae buys or guarantees around $3.2 trillion in residential loans, about 28 percent of the entire residential mortgage market in the United States. Lenders typically issue loans based on the agency's guidelines.

Buyers who do not meet the new Fannie Mae requirements may have to consider a nonconforming loan from the Federal Housing Administration. These loans, which do not follow Fannie Mae underwriting guidelines, require mortgage insurance premiums and, for those with low credit scores, higher interest rates and steeper down-payment requirements.

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES (SOURCE: HSH Associates)

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Where Are the Chinese Cars?

For at least half a decade, Chinese manufacturers including Brilliance, Geely, Great Wall and BYD Auto have displayed vehicles at the Detroit and Los Angeles auto shows, often with news releases announcing plans to sell cars in the near future. But the cars never materialized in the dealer showrooms — which also remain missing.

The BYD F3DM could become a notable exception. BYD says its plug-in-hybrid car from China is on track to reach the United States in spring 2012. Even if that proves true, it may register as barely a blip in an increasingly crowded market for alternative-power cars, industry analysts say.

Still, just getting the car to market would represent a leap forward for a Chinese manufacturer. In 2006, Brilliance said it would start selling its cars in the United States by 2009. To date, none have arrived. And Chery Automobile backed out of an agreement with Chrysler, which was supposed to provide a beachhead in the American market.

In 2006, the Nanjing Automobile Group, which bought the assets of the bankrupt MG Rover, said it wanted to be the first Chinese carmaker to build vehicles in the United States — including a new edition of the MG sports car — but its plans to open an Oklahoma factory never materialized.

Geely, which bought Volvo last year, showed small sedans at the 2006 and 2008 Detroit auto shows, but those cars have not been certified to meet American safety and emissions standards.

The false starts are a result of Chinese automakers’ letting their ambitions get ahead of the hard work of cracking the ultracompetitive American market, analysts say. Fueled by cheap financing and booming domestic demand, Chinese automakers have been growing rapidly at home. That has given them the confidence, though not necessarily the tools, to start selling to Americans.

“This isn’t computers or cellphones, where you just get into a big-box store,” said Bill Visnic, a senior analyst at Edmunds.com. “You need some dealerships, and those things are tremendous investments of time and resources. They thought it was going to be a lot easier than it was.”

It hasn’t helped, of course, that the last few years have been a terrible time to introduce cars. When the housing market plunged, followed by the general economy, consumers hunkered down. Vehicle sales in the United States fell about 40 percent from 2005-9, General Motors and Chrysler received government bailouts, hundreds of dealerships were shuttered and auto loans dried up. Even sales of hybrids suffered as oil prices receded.

While the economy has improved somewhat, the Chinese still face big challenges. Partly, they must determine which part of the market to attack. Compact cars may be one of the easier entry points for a new company, but competition is fierce and margins are slim.

The Chinese could try to leapfrog the market by selling more advanced hybrids and plug-ins. Indeed, Coda Automotive of Santa Monica, Calif., plans to import the bodies of a Chinese sedan, the Hafei Saibao, into which the company will install electric powertrains. But hybrids and electric vehicles account for just 2.2 percent of global sales, according to J. D. Power & Associates.

“Because consumers are wary about electric vehicles and their driving range and batteries, they are even more likely to go with more established companies like G.M. and Nissan,” said Mike Omotoso, who follows the sales of hybrids and electric vehicles for J. D. Power.

Mr. Omotoso said the Chinese could buy competitors and use their dealers to reach Americans. The most likely candidate for this strategy is Geely, which acquired Volvo last summer. Even then, Geely would have to spend millions of dollars on marketing — and hope American consumers are adventurous enough to try a new brand.

“The problem with the Chinese car companies,” Mr. Omotoso said, “is they are trying to run before they walk.”

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MORTGAGES; When Rate Locks Expire

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AS mortgage rates have edged higher, many borrowers have been locking in loan rates for a home purchase or refinancing.

A lock-in agreement -- also called a rate lock or rate commitment -- protects against sudden spikes in interest rates by freezing the terms of a loan while it is being processed, which could ultimately save a borrower tens of thousands of dollars in interest costs over the life of the loan.

For every percentage point rise in rates, 300,000 to 400,000 would-be buyers historically are priced out of the market in a given year, according to the National Association of Realtors.

The average rate nationwide on a 30-year fixed-rate loan, the most common type of home mortgage, hit 4.86 percent at the end of 2010, up from 4.17 percent in early November, according to Freddie Mac. On Thursday, the rate was 4.77 percent.

While lenders and mortgage brokers have reported an increase in lock-ins as rates have risen in recent weeks, they say these guarantees have been complicated by changes in the Truth in Lending Act -- which add more protection for consumers but also lengthen the loan-application process.

In 2010, the average mortgage took 52.1 days to close, up from 46.9 in 2009, the year the new regulations took effect, according to J. D. Power and Associates, a marketing information company. (It was also the third consecutive annual rise, the company said.)

As a result, an increasing number of borrowers who elected to lock in their rates at the end of last year but did not close on time must now arrange extensions of their lock-in agreements.

Borrowers could end up paying at least several hundred dollars in extension fees to lenders. Most lenders charge from 0.10 to 0.25 of a percentage point of the loan amount for a 15-week extension; for a $400,000 loan, that can amount to $400 to $1,000.

Of course, a number of other factors can also impede a closing -- especially considering the industry's tighter lending requirements. These range from lower credit scores, to delays in securing appraisal, to incomplete submission of documents verifying income.

Most rate locks last from 30 to 60 days, though some may be as short as 7 days or as long as 120.

Irene Amato, the owner of the A.S.A.P. Mortgage Corporation in Cortlandt Manor, N.Y., recommended that borrowers take out a lock for 60 to 90 days, especially for a refinancing -- which, she said, could take a little longer than a home purchase because of a backlog of applications.

Another big hurdle for borrowers is navigating a crazy quilt of lock-in policies from different lenders. Some may require that a borrower have a specific property chosen, for instance, while others may not.

''EVERY lender is different,'' said Jim Guerriero, the branch owner of First Lenders Mortgage, a mortgage broker in Middletown, N.J.

Some lenders will offer 60-day lock-ins free of charge, while others may charge ''points'' -- or fractions thereof -- based on the size of the loan, which could amount to several thousand dollars. (A point is equal to 1 percent of the loan amount.)

If your credit score plummets after you've signed a rate lock, lenders in some cases might rescind the lock. And some rate locks have buried in their fine print a caveat that a rate can in fact rise a quarter of a percentage point or so and still be considered applicable to the borrower.

''All I can say,'' Ms. Amato said, ''is get everything in writing -- every last detail.''

The Federal Reserve recommends having a real estate lawyer review a rate-lock agreement before you sign one. It has a consumer guide available at its Web site.

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

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