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Tag: FHA (page 1 of 1)

June 14, 2010

The NAR Backs the FHA… Who’s Backing You?

by

Real Estate Renaissance Man

Author website
Late last week the House of Representatives passed H.R. 5072, the so-called FHA Reform Bill.  One of the major components of that bill (you can read the text of the bill here), raises the monthly insurance premium for all FHA buyers.  What does that mean to your bottom line?
 
Currently, the FHA monthly premium is .55% and the new legislation Congress is looking at will raise the premium a wopping 272% to 1.5%.  What does this mean to your buyer?  If they are at the limit of their eligibility on a $300,000 purchase price now, they would have to lower their interest rate by over 1.25% to still qualify for that house.  In other words, if the current market rate is 5.00%, it would have to drop to 3.75%!  If you think you might have trouble locating a lender who will do 30 year fixed loans at 3.75%, don’t worry; you can also lower their purchase price to bring them back into eligibility.  Their new price would only have to drop 10%!  A buyer looking at $300,000 today will be looking at $265,000 to $270.000 as soon as this bill passes. Does that change your market opportunities for the better… or the worse?
 
I understand why the NAR supports this, it keeps FHA alive and well, doing sub-prime loans for people who can’t afford to buy a home, which in turn keeps dues paying agents busy and coughing up their fair share.  But why do agents support it?  It’s going to have a devestating affect on your clients, and therefore on you.  Do you support it?  Have you let anybody know?
January 22, 2010

My “Jim Casey” take on the FHA’s Policy to Address Risk and Strengthen Finances

by

Mortgage Systems Samurai

Author website

“Before I knowed it, I was sayin’ out loud, ‘The hell with it! There ain’t no sin and there ain’t no virtue. There’s just stuff people do. It’s all part of the same thing.” – (Preacher) Jim Casey / Grapes of Wrath

Here’s my take on the FHA 1/20/10 press release and the 1/21/10 Mortgagee letter as posted on my blog on January 21st, 2010:

FHA ANNOUNCES POLICY CHANGES TO ADDRESS RISK AND STRENGTHEN FINANCES

PRESS RELEASE: January 20th, 2010 – Deciphered into (highly biased and subjective) English by me on January 21st, 2010.

I basically cut out a lot of the stuff that doesn’t matter and tried to just talk about what will affect you. If you really want to torture yourself, here’s the original release.

The FHA statement in italics – My translation looks like this…easy to read. Ready? Cool, let’s get down to business then….

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

FHA is hemorrhaging cash due to fraud, rapidly rising defaults and basically because the sleazy sub-prime guys ran around announcing that FHA was the “New Subprime” when everything collapsed in 2007 after Wall St. decided to take the stance that it wasn’t a good idea to allow brokers, lenders and loan officers to give away loans to people that couldn’t afford the payments (even though they started the whole damn thing in the first place).

Who would have though that would come back to haunt them huh? (file this under “ya think?”)

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

Ok, blah, blah, blah…We’re making changes to FHA to make it more expensive to get an FHA loan so that less Read more

September 28, 2009

FHA Broker Approval Delegated to Approved DE Lenders: Will This Squeeze Out Smaller Players?

by

Mortgage Technologist

Author website

Over the last eight days, calls from my clients and mortgage associates having been growing on a daily basis concerning the recent announcement by the FHA delegating mortgage broker approval to originate FHA loans to approved DE lenders. Quite frankly, many small lenders and mortgage brokers are concerned the mega-lenders will yield a big stick and force the smaller players out of the FHA playing field.

In this video, I provide an overview of the concerns, share background information and then present my thoughts.

FHA Delegates Broker Approval to DE Lenders

Note: This is my first video, so please excuse any rookie production mistakes.

September 11, 2009

Why Your FHA Decision Engine Approval Gets Denied

by

Mortgage Technologist

Author website

The occurrence of FHA loans receiving an FHA TOTAL Scorecard approval and subsequently having the loan denied once it hits the underwriter’s desk is happening more and more. It’s a reality the field must acknowledge and from what I have seen, the good originators have taken note and have adjusted their game accordingly.

However, before adjusting your game, you must understand the reasoning behind why this is happening and will continue to occur in the future. Quite frankly, it is at this execution juncture point, that the details and actions of originators are what separate the superstars from the rest of the pack.

The Reason

While the technical reason behind this shift has been in place for years, the enforcement has not until recently. In a nutshell, HUD has stepped up their post endorsement technical reviews and NOT letting lenders insure loans they allowed in the past. In short, previously they were letting lenders slide and NOW they are NOT!

HUD has from the beginning made it clear to lenders that regardless of the Automated Underwriting System (AUS) findings, it was still the lenders responsibility to ensure the data input to TOTAL Scorecard was accurate as required per FHA guidelines AND also demonstrate if there are factors that could not be determined, measured or quantified by the TOTAL Scorecard decision that would invalidate the initial approval decision.

An example of such, is multiple and excessive Non-Sufficient-Funds (NFS) on the borrowers bank checking statements. Since FHA TOTAL Scorecard cannot measure nor account for NSF’s in their decision (recommendation), they defer this determination of layered risk analysis to their Direct Endorsement (DE) lenders to establish if unaccounted layers of risk invalidate a TOTAL Scorecard approval/recommendation.

It is important to note a point HUD stresses to lenders on the back-end…the TOTAL Scorecard decision is ONLY a recommendation and it is the responsibility of the DE lender to determine the accuracy of the approve recommendation. Thus, “due diligence” is the ambiguous “standard” DE lenders are being held to in regards to TOTAL Scorecard approvals. What this means to originators, Realtors and builders is the “approval” received from TOTAL Scorecard (Fannie and Read more

May 13, 2009

FHA and the $8000 Tax Credit – what I know and what I don’t….

by

Mortgage Officer

Author website

It has amazed me how many people (mainly Realtors and lenders) are already out there proclaiming that you can now go back to the days of the “No money down” loans with FHA and you can do it right now.   Well, that’s not quite the whole story.    Let me explain:

What I know:

  • I know that FHA is now allowing a borrower who qualifies for the $8000 tax credit to use that tax credit as the downpayment for purchasing the house.
  • I know that they can’t get any cash back – if they need $7000, they can only get $7000.
  • Government agencies and non-profits can do second liens against the house for the downpayment.
  • The payments on that second lien need to be counted into qualifying rations.   In other words, if you are going to borrow the $8000 so you can use it for your down payment, you need to be able to pay that amount back.  Gee, there’s a novel concept.
  • FHA approved mortgagees can do a “bridge loan” against the tax credit.

What I don’t know:

  • I don’t know whether any FHA approved non-profits are going to be willing to do second liens in situations like that.
  • I don’t know whether any FHA mortgagees (such as my bank) are going to be willing to do a bridge loan against a tax credit.   Typically banks don’t like to do unsecured loans and I’m not sure how you can secure a loan against a tax credit.
  • I don’t know what fees and rates will be charged for such a bridge loan.

Personal feelings:

  • In today’s volatile market, if you aren’t able to come up with 3.5% for a downpayment on a house, maybe you should continue to rent for a while.
  • The “tightest” 12 to 18 months that a home buyer typically has is their first 12 to 18 months when they are getting used to the house payment.   Do we really want to add the cost of having to pay back a bridge loan on top of that? 

So I guess my recommendation is essentially this:

  • Take a deep breath.
  • Wait to give the financial institutions the time to sort this all out.
  • Once we Read more

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