Lending News

Trump Administrations Reverse Mortgage Change

Donald Trump's of ministration is in the works of raising premiums and putting more restrictive limits on loan programs that allow some seniors to supplement as their income. 

The US Department of Housing and Urban Development plans to reveal changes to the reverse mortgage program. That program lets borrowers take money out on the house they own. The Trump administration believes doing this will put it on a stronger financial foundation, because after all it is is paid by the taxpayers.

Ben Carson says there have been troubling loses in the program over the years, and he believes these changes are the right thing to do by the taxpayers. 

The changes won't affect those with existing mortgages, only those to take out new loans. More than a half 1 million borrow ours, 650,000 have outstanding reverse mortgages which are insured by the Federal Housing Administration. 

The changes to the program will make new borrowers pay higher premiums upfront, but lower ones throughout the life of the loan, which protects taxpayers if the seniors live longer than expected. Borrowers are set to pay 2% up front, and 0.5% throughout the life of the loan. 

Right now borrowers only pay 0.5% upfront and 1.25% annually during the loan. If someone wanted to borrow more than 60% of their homes value in the first year they're already paying 2.5% upfront, so luckily for them their premiums will be going down. 

To balance it all out, most seniors will be able to borrow less money. Right now the average borrower takes out 64% of their homes value, and at current interest rates, they'll only be able to borrow 58%. Keep in mind these numbers are not concrete, they are based on the average borrower. So for the average borrower who can only afford to borrow less, some may be able to borrow more depending on what happens to interest rates. 

The whole point of the reverse mortgage program is to help seniors take out money...

Mortgage Rates & What's Next

The federal reserve raise the rates for the third time in seven months. Is this the end of our low mortgage rates? Let's see how it will impact your home buying adventures, and refinancing plans. 

The fed funds rate is an overnight bank-to-bank lending rate.  This isn't the rate for the every day home shoppers, it's the rate the Federal Reserve uses to influence the economic rates. 

When there's been a slow down in the market, feds usually lower rates to help boost the economy. During the financial crisis of 2008, the Fed lowered rates all the way down to .25% and it basically stayed in that area until the end of 2015. 

After 2000After 2015, rates were increased in installments of .25% and have been raised four times since then. 

Currently the fed funds rate is 1.25%, but mortgage rates for Americans have not risen much and are actually looking at some of the lowest points of 2017. 

OneOne product that isOne product that is affected by Lee's fit hikes is the Home Equity Line of Credit, HELOC. 

These rates are based on two things, a set base rate is called a margin, plus a fluctuating right called an index.

HELOC's index is the Prime Rate, and the prime rate is what is directly effected by the Fed Funds. The prime rate is the fed funds rate plus an additional 3%.

Given the fed funds rate is 1.25%, this makes the prime rate at 4.25%.

So anyone with a HELOC has a rate of 4.25% plus their margin.  Margins are usually between zero and 3%, plus prime, and your margin is factored by your credit quality and wet you're borrowing relative to the price of your home.

For example, if HELOC rates rose 1%, your monthly interest cost on a $100,000 HELOC is rising by $83 per month. 

Traditional mortgages are staying low

Traditional mortgage rates are linked to trading in mortgage bonds, not...

HomeBuyer's Believe Wrong

Genworth Mortgage Insurance recently conducted a survey and they concluded that potential first-time homebuyers are hindered from joining the real estate market because they cannot meet the 20% down payment rule-of-thumb. Homebuyers may think they are required to have 20% in a down payment, but this is not the case. It's totally possible to put down far less and still get a house, but your chances diminish. 

This survey took place at the 2017 Mortgage Bankers Association Secondary Market Conference in New York City. 

The survey found 28% of the respondents believe that a 20% down payment is a requirement to buy a home. On top of that, 41% of industry executives were surveyed and found they believed potential borrowers who know 20% is not a requirement believe it's far more difficult to buy a home without it. 

A whopping 39% of mortgage industry professionals believe that consumers' lack of knowledge of the process is what is actually hindering them from joining the market.

Another aspect behind this was a lack of inventory at 28%, and crazy student debt at 27%. The rising interest rates showed up at around 6%. 

A lot of first-time home buyers are passing on buying a home because they mistakenly believe they need 20% down, even though this category of buyers is leading the purchasing market. There are many options available to allow homebuyers to become a homeowner without coming up with a lump of cash. There needs to be more education so we can get people into homes.

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How Rate Hike Hurts Buyers

Yesterday, the federal reserve released some less than pleasant news for potential home buyers. Not only did they raise interest rates, they also said rates will steadily climb throughout the year. Despite the volatility with the rates in the past year, it looks like we will be watching them rise whether we like it or not. 

Monthly mortgage payments will also rise, and potentially tightening the housing supply. 

They announced rates will rise .25% and they also have two more installments of rate jumps during the year. 

Unbeknownst to some there is a difference between mortgage rates and short-term interest rates. The Fed determines the short-term interest rates which keeps mortgage rates at a similar number. Ultimately the Fed influences mortgage rates. 

It's most likely going to become harder to buy a house because it'll be more expensive month-to-month, and those who currently have a house probably won't be looking to move since their rates are locked in. The homeowners who were considering moving, could very well stay right where they are.

Last summer the rate on a 30-year-fixed mortgage was 3.44% and just last week they were 4.39% which is another historic low. This increase of .25% will force buyers to spend another 3% each month on their loans, assuming they have an average $250,000 house. 

Small increases aren't going to push many people out of the buying Poole, but when it keeps rising it will eventually push many people out. 

On the building side of things, materials are expensive as-is and continue to climb up in price, so raising rates could very well push a number of a builders out of the market.

In the past few years rents and housing costs have been rising faster than ever while the rest of the economy stays somewhat level. This is surely not helping the shortage of homes available.

Now is not the time to panic. Buyers can request adjustable rate mortgage is which...

Millennials Leverage FHA Loans in January

Ellie Mae Millennial Tracking has shown that millennial's are increasing their share in the housing market, they are accounting for 84% of closed loans with 35% being FHA loans. 

What appeals to millennials about the FHA loans is they offer a lower down payments and a lower FICO score requirement. It is expected that FHA loans will continue to increase, especially in the millennial generation. Two markets with the most millennial FHA loans happen to be in Owensboro Kentucky, and Atlanta Georgia. On average it takes 49 days to close. 

Collectively, the average millennial's FICO score was 724; and the average FICO score for conventional loans was 748. Yeah average FICO score for VA loans or 734 and the average for FHA loans were 690. 

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Gov't Cracks Down On Deceptive Lending

When a few California reverse mortgage firms told their customers they could not lose their homes, they made a huge mistake. For beginners, they are dead wrong, and they knew it. They were acting as predators. The federal Consumer Financial Protection Bureau got wind of it and fined several of these California based companies.

One company American Advisors Ground in Orange had to pay around $400,000, while the others paid only $65,000. After they paid their fines they changed their loan disclosures, they still wouldn’t admit to any wrong doing.

The game of reverse mortgages is designed for people who are retired, or getting close to retirement. It gives them money in exchange for equity in their homes, and are allowed to stay in their homes until they die or decide to sell.

The government claimed these groups falsely advertised to its customers they would keep their homes no matter what.

It’s completely possible for borrowers to default on their reverse mortgage and lose their home. Sometimes they have to fail elsewhere in payments too like property taxes, PMI, and even maintaining the upkeep of their home. What happens is buyers take that stack of cash and spend it all and don’t have any left to pay their taxes.

As the growing number of defaulted mortgages grows, the government began requiring more underwriting of borrowers to ensure they can pay their monthly obligations, and to tighten the policies surrounding foreclosures prompted by delinquencies involving the Federal Housing Administration and their insured mortgages.

The companies also implied that these mortgages were federally backed, which is also completely untrue. However, some mortgages are federally backed, but are not a government benefit.

The companies have since revamped their marketing campaigns and made legal compliance a vital part.

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VA Loans & What You Need to Know

Good news for Veterans! If you have served your country, you can get a loan backed by the U.S. Department of Veterans Affairs without a down payment!

As the days of the financial crisis become more distant in the past mortgage options are becoming more flexible. A good option that is often unnoticed is the VA loan.

VA Loans Feature

To everyone’s surprise these loans aren’t made by the VA. The mortgage lenders make them and the VA backs them, giving lenders more flexibility.

The features of VA loans include:

-          100% financing of the home, with a loan limit of up to $417,000; also with the possibility of going up to $1,000,000 in high-cost areas. The VA website has loan limits for your area.

-          Possible financing of your closing costs, which include appraisals, credit report, title insurance, lender origination fee, recording fees, and even survey fees. In your average closing, these are the major expenses.

-          The ability to finance a one-time VA funding fee that is mandatory for all VA loans, and the possibility to have this fee waived if the buyer has an injury or disability.

-          Mortgage insurance? Nope! This can save a buyer hundreds of dollars a month.

-          No penalty if you pay off the loan early.

-          Loans for a primary residence only.

-          A plethora of options for fixed- or adjustable-rate mortgage loan programs.

Who is eligible for VA loans?

In order to receive a VA loan you must work with a specialist...

New Mortgage Programs and Their Impact

America’s top home lending banks have made a ton of headlines lately as they have been dealing with non-Federal Housing Administration (FHA) low-down payment programs. The banks are JPMorgan Chase, Quicken Loans, Bank of America, and Wells Fargo. What are these programs? And do they change the game of credit availability for the next while?

Each bank has their own version of the same thing. Wells Fargo’s your First Mortgage, Bank of America’s Affordable Loan Solution, JPMorgan Chase’s Standard Agent 97%, and Quicken’s 1 percent down payment plans are essentially the same plan, just with minor variations of company policy. These are appealing to first time home buyers and low to moderate income borrowers who may not have enough for a down payment on a home, or have less than average credit scores. Each bank also has their own credit score minimum: Wells Fargo – 620, Bank of America – 660, Chase and Quicken – 680.

Borrower friendly features

The cool thing about these programs is they are friendly to the borrower. They come with features that allow the combination of down payments with gifts and grants, homebuyer counseling, consideration of nontraditional forms of credit, and no PMI under Bank of America’s program. Bank of America and Wells Fargo flirted with selling their loans to Fannie Mae and Freddie Mac, respectively. Self-help groups like Self Help Credit Union, which is a nonprofit, offers help for first-loss risk coverage in lieu of PMI, which saves the borrower a ton of cash. Quicken offers its clients 2 percent grants and then sells the loans to Fannie and Freddie under its Home Possible advantage program, which does require PMI. On the other hand Chase will sell to Fannie and Freddie, but it is unknown of they require PMI.

Not identical, but similar

The two most popular programs...

What Really is a Good Credit Score?

Your credit score is perhaps the most important number lenders will look at when trying to buy a home. These numbers identify you as a person who is either able, or unable to pay your debts whether they are credit cards, car, or student loans. The general rule is if your number is high, you will be fine, if it’s low, you will have trouble.

So what exactly is a good credit score?

The perfect credit score is 850, but anything above 760 is considered to be in the best range of scores. Because you have proven you can pay off your debts, mortgage lenders want to do business with you. You will also receive lower interest rates with such a high score, and this is their way of enticing you to go with them instead of another lender.

A good score is from 700 to 759; a fair score is 650 to 699. The lower scores indicate you’ve had a little trouble making payments, and lenders will assume you will struggle to make those payments as well. You can still get a mortgage with these numbers, but it will come with the cost of a higher interest rate.

Any score below 650 is deemed as poor, and you’ve had a few rough patches in your payment history. Some banks will still lend you a mortgage, but you will have to jump through a ton of hoops and pay out the wazoo in interest.

How credit scores are calculated

Three major U.S. credit bureaus track your scores; Experian, Equifax, and TransUnion. Each score is somewhat similar, but pulls its info from different sources. TransUnion looks at your job history while Equifax checks out your rent payments. Here are the variables each definitely looks at.

Payment history – 35%: Can you pay your debts on time? If you’ve never missed a payment, a 30-day delinquency can cause as much as 110 point drop in your score.

Debt-to-credit utilization – 30%: This is how much debt you have accumulated through credit cards, divided...

Mortgage for Studentds with Big Debt

There is a debate going on surrounding the topic of student debt keeping millennials from buying homes. One side says high-earning young professionals are saddled with student debt, while the other side other factors are to blame.

However, there is a path for these young people to buy their first home. A Florida investment advisor says he wants to launch a “BurkeyLoan” which combines the borrowers’ student loans and their mortgages. This is essentially refinancing their school loans into their mortgages.

BurkeyLoans will be targeted at college graduates who have “top-tier work and academic profiles” who are applying for mortgages around $425,000-$600,000. At the years end, this new mortgage product should be available for those needing homes in the $200,000 price range.

Student debt is one of the obstacles that is blocked millennials from obtaining a mortgage. There often times isn’t enough money to pay a mortgage once they make their student loan payment that month.

The main driver between housing haves and have-nots is education, and not the debt used to fiancé it. Men with bachelor’s degrees earn $35,000 more a year than those without a degree, and women ear n $25,000 more. That much money can go a long way with a home.

The other side of the argument is that grads with degrees leave with $35,000-$54,000 in debt. And if they decide to go to medical and or law school, they can potentially end up with six-figure debt numbers.

The millennials with the higher end debt are considered “high-performance millennials” and there are roughly 11 million of them. BurkeyLoans is aiming for the top 20% of income distribution who went to the best schools and has great work experience.

A BurkeyLoan might work like this: If a student is trying to buy a $500,000 house but has $50,000 in student debt he would roll the two amounts into a single mortgage, but would have to make a down payment close to $50,000....

New Rules for Self-Employed Borrowers

Being self-employed requires a different set of credentials than a salaried person if you are looking to get a mortgage. Recently, the rules have changed for the population of self-employed borrowers, so let’s take a look at how this will impact you.

Self-employed borrower basics

The first two things lenders look at when deciding if you qualify for a mortgage is income and assets. This determines how much you can afford to pay per month. The income is reported as sole proprietor or owners of entities like corporations, partnerships, or limited liability companies.

As a sole proprietor, you are expected to file your self-employed income on IRS schedule C, which tracks your income and expenses for the year.

Apart from salaried borrowers who get to use their gross income for loan qualifying, a sole proprietor must qualify using their net income from schedule C.  A 24 month average of your net income is calculated for sole proprietors as opposed to the 12-month for salaried borrowers. If your income is lower than the previous year, lenders will use the 12-month average of the most recent year.

If you are self-employed and have a corporation, partnership, or LLC, the IRS forces you to file separate tax returns; and if you owe more than 25% on your entity, you will need to provide lenders with these full business tax returns, along with your personal.

Exactly like the schedule C, lenders average your income for 24 months using two years of business (and personal) returns, and if the most recent year is lower, they average your 12 month income.

As for assets, self-employed businesses have a lot of money in their businesses and use the funds for their down payment. Sometimes this is allowed, and if so, your tax preparer must verify that the funds in your business is being used for a home purchase, and it won’t have an impact on your business.

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What is PMI and Mortgage Points

When you begin the process of buying a home, with little debt, and an outstanding credit score, you might qualify out of the 20% down payment. Even if you skip the down payment, they (the bank) will get you somewhere else. It’s best to be ready for it.

One way to compensate for the down payment is to increase the cost of your Private Mortgage Insurance (PMI). When you come into the bank to essentially buy mortgage points and walk out with a lower credit score, this whole process might begin to take a turn to the unknown.

So before you sign your name, be sure to completely understand how these two concepts actually work.

What is PMI, and how that no, or low, down payment will cost you

The mortgage company makes you get insurance to protect them if you happen to default on your loan. Typically you will have this insurance until a specific date, or until your loan reaches somewhere around 78% to 80%. This is how the lender will benefit if you do in fact default.

The cost of the insurance is based on the size of your down payment and your credit score. It can also be anywhere from 0.03% to 1.5% of the total loan amount. For instance, if you borrow $200,000 with a 1% PMI rate without a down payment that will cost $167 a month. 

PMI insurance used to be tax-deductible for certain tax bracket which would diminish the impact of this cost. It’s possible the current tax deduction on mortgage insurance payments will be extended, but don’t take it for granted.

Even though you’ve reached that magic number to stop [paying PMI, it doesn’t just go away. You must request the cancellation in writing and have paid your payments on time. You might also be forced to pay for an appraisal to prove the value of your home, or show proof there are no liens your house.

If you meet all those requirements, your lender must cancel the PMI.

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Update on the Mortgage Rates

Weak retail sales have scared the market making mortgage rates fall. This means the first interest rate hike is still a few months away. The mortgage rate for a 30-year fixed rate fell to a 3.91 percent; which is actually down 4 points from this time last week.

They dipped a bit early in the week and then hung out around 3.89 until settling on 3.91. The 15-year fixed mortgage rate is at 3.03 percent, and the 5/1 ARMS is at 2.89 percent.

Another mortgage rate update will come sometime next week. It’s still a good time to buy if you are teetering on the fence.

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4 Loans That Affect Your Mortgage-Worthiness

There are different types of debt available to you so that one day you can boost your credit score. Don’t be fooled by the system that is always telling you to borrow, being in debt is never a good thing and it can actually hurt you if you over-borrow.

Searching for a new mortgage is something every homeowner must do (except the stupid rich ones) and your credit score matters here. It can make or break the mortgage approval, and even determine which if you get the house you want.

There are two types of debt: secured and unsecured. When borrowing money from a bank to buy a house, the bank has the option of taking back the house if you default. This is a secured debt. It is balanced against a tangible object as a security measure. Unsecured debt is something the bank cannot get their hands on in case you default on your payments. An example of unsecured debt is student loans and credit card debt.

Let’s take a look at the four key consumer loans that make our lives hell. These will be a mix of secured and unsecured debt on your credit score – and ultimately your mortgage worthiness.

Student Loans

Student loans are unsecured debt. These aren’t a bad mark for your credit score if you pay your bills on time. Because they take decades to repay, these can actually help your credit score. Loans that take a many years to pay off have the possibility to boost your credit score. These can be figured into your debt-to-income ratio, so they might affect your ability to afford a mortgage.

Auto Loans

Auto loans are secured debt because the lender can reclaim the car if you default on your payments. This type of debt has the possibility of raising your debt score by diversifying the type f debt you carry. Since auto loans are more difficult to get than credit cards, some lenders might see this as a good sign. They will see you have gained...

Mortgage News Rate Update

Here’s some good news, mortgage rates for the 30-year fixed mortgages rose this week. The current rate borrowers were quoted at 3.62 percent, which is up 6 basis points from last week. The 30-year fixed mortgage rate rose early last week, and hovered around 3.65 percent, and fell to 3.62 percent.

Experts believe the rate increase was due to strong economic activity in the U.S. and Europe. They are also expecting some volatility since the monthly job report will come out on Friday.

For the 15-year fixed mortgage rate, it was 2.87 percent, and for the 5/1 ARMs, the rate was 2.75 percent.

Just a quick update on the mortgage rates.

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Pending Home Sales Decline

Housing has taken another hit recently with the National Association of Realtors latest pending home sales index report claims contract signings have fallen 4.6%. The good part? The rate is still 6.4% above from last years report.

According to Lawrence Yun, the NAR chief economist, the housing marketing is being excessively constrained. It's a combination of weak consumer confidence and and continuing tight lending criteria has held back home buyers, even though the private sector has added almost 2 million new jobs in the past year.

He also stated America's monetary policy is confusing and contradictory, because America's best financial capacity and best credit scores pay the highest mortgage interest rates. The Federal Reserve has been trying to lower mortgage rates, but more consumers are still taking out huge loans that have the highest interest rates.In order to fix this, Yun says the higher loan limits must be reinstated.

The largest decline was seen in the midwest, but our region is still 12.3% higher than last year. The smallest decline was in the West where rates declined 2.1%. Reduced access to credit and ailing jobs market is continuing the put a strain on the housing market.

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Washington's Report- Anti-foreclosure Program

The Obama administration just revealed its scorecard on its anti-foreclosure program recently, and there's just one word for it: minimal.

Roughly of the one million financially burdened homes in the country who have been given mortgage payment reductions through three month trials, only 116,000 have been given permanent load modifications from participating lenders. The Home Affordable Modification Program was the institution that created this assistance program. Also, 60,000 borrowers have been kicked out of the program for several reasons.

Last year Obama and his administration said the program would help three to four million Americans in the next few years. They made this claim with very unrealistic expectations, and they know it now seeing the numbers that actually appeared.

      The complications that have disrupted the HAMP efforts so far:

          This program allowed borrowers to request three month trials without documentation of their income. Many of them were able to withstand the trial periods, but they weren't able to complete the program requirements such as documenting their income.

          The program was designed to withstand a 31% decrease of monthly household incomes, but it cannot withstand the common situations where job losses have sharply reduced household incomes. Most of these end up in foreclosure.

         The program is limited to only monthly payment reductions, not cutting its principal they owe. This program is designed to help out a few distressed homes, not the 15 million Americans who jumped into a losing battle.

It's often argued that these foreclosures cannot be averted until most borrowers and lenders agree to write off some of the debt they owe. A good point to keep in mind is that buyers are not the only ones to blame. Some knew they weren't capable of making their...

Four Need to Knows about Buying & Selling Simultaneously

Buying a house was once a process that only took a couple of months. But today tight mortgage guidlines, market concerns, and distressed sales appraisal dramas extend this process all while making it much more complicated.

If you're trying to buy and sell at the same time, it seems like you've undertaken all these complications twofold. However, getting educated about today's market and figuring out all your options gives you strategy. There is no need to panic and worry about all the outcomes. here are four tips that will make buying and selling your house much easier.

1. Meet with your agent way before you plan to list your house.

           This allows them to give you an idea on how long it will take to sell your house, and possibly how you can move it along faster. They'll give you advice when and at what price to list your house, and show you how it can realistically be expected to quicken the sale of the house. They can and will tell you what price you will most likely receive on your house. This opens up the option whether you need a short sale (if your houses' value is less than what you owe) or not. This will affect your qualifications on your loan application in the short-term. Short sales make it very difficult to get a loan for a few years, but if you want to and need to buy in the near-term with a short sale, discussing legalities and logistics must be done with your CPA, mortgage pro, or attorney. Meeting with your agent a year before you plan on moving isn't too early at all. All the information you need will come from meeting with them this early.

2. Meet with your mortgage broker before you start looking for houses or put yours on the market.

            Obviously this step would have been done anyway, but it is critical they walk you through this process before any major contracts are signed. Talking with them will help you:

calculate the math on...

Establish a Mortgage You Can Live With

Establishing a Mortgage You Can Live With

All lenders have a few simple formulas that calculate how much of a mortgage you can afford. Qualifying ratios is the name of these formulas because they measure the amount of money that should be spent on your motgage in relation to your income and other expenses. Keep in mind each lender has their own version of these qualifying ratios and their calculation numbers are a bit different from one another.

In order to qualify for loans, your housing expenses should not exceed over 28% of your monthly income. Your monthly housing expenses include Mortgage principal, interest, taxes, and insurance. Say $30,000 is your gross annual income, then your monthly income is $2,500. Now, 28% of $2,500 is $700. You would most likely qualify for this loan because $700 is what you would pay monthly, and the lender would see you would have plenty of extra money.

It is extra important that you select a home that will keep you & your family happy for years into the future.

When figuring out your budget when buying a home, you absolutly need to allow room for extra expenses like maintenance and utilities. If you plan on buying an existing home, collect utility cost averages and maintenance costs from the previous owners to aid yourself in preparing for home ownership

If your finances are in great condition, you could look for a home priced two or three times your yearly salary. The mortgage calculators can give you a rough estimate of how large of a mortgage you might qualify for, speaking with a lender or mortgage broker will definately give you a more accurate figure.

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Current Mortgage Rates



 

 







**Current Mortgage Rates** 


{ Friday, July 15, 2011 }

 

 

Courtesy Of:  Bev Leonhardt NMLS #55044

502-445-2827

Conventional 30 Year -----------4.625%

Conventional 15 Year------------ 3.875%

FHA 30 Year------------------------4.500%

FHA 5 Year ARM-------------------3.500%

 VA 30 Year--------------------------4.500%

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