FHA Loans

According to a report released yesterday by the Government Accountability Office, the Department of Housing and Urban Development has left senior homeowners vulnerable to abusive FHA lending practices because of shortcomings in programs that offer reverse mortgage loans.  Reverse mortgages, which are usually backed by HUD’s Federal Housing Administration, enable seniors to withdraw equity from their homes. The senior home loan and the accumulated interest do not have to be paid back until the owner dies or sells the home. But the upfront costs are substantial.  While these specialty FHA home loans have become more attractive to seniors as the economy has soured and housing values have dropped, reverse home loans are complex. That is why the FHA has long required that the seniors take part in HUD-approved counseling sessions before these cash out refinance loans are processed. Yesterday’s report concluded that HUD “lacks effective controls” over the counseling programs.

Based on undercover participation in 15 counseling sessions, the GAO found that the counselors conveyed accurate information but none covered all of the mandatory topics and some exaggerated the length of the counseling sessions, which can be conducted by telephone or face-to-face. The report also said that seven of the 15 did not discuss alternatives to reverse mortgages, as required.   The report, requested by Sen. Claire McCaskill, also said that a limited review of reverse mortgage marketing materials found some misleading claims. Federal agencies responsible for protecting borrowers had reported few complaints. Some of the states that the GAO contacted also reported cross-selling, the practice of enticing borrowers to use their mortgage funds to buy insurance or other products that are not suitable for them. Recently enacted federal law aims to curb such practices as do some state laws.  

HUD spokesman Brian Sullivan said the reverse mortgage program has more safeguards, such as required counseling, than do private mortgage loan programs. “These existing consumer protections have contributed greatly to the success of the [reverse mortgage] program, which has provided financial security to several hundred thousand seniors,” he said.  According to the trade publication Inside Mortgage Finance in the first quarter, the FHA backed about $7.8 billion worth of reverse home mortgages, the largest amount in any quarter since the agency launched the program in 1988.

Nearly two months ago, the FHA mortgage lending announced its plans to ask Congress for nearly $800 million in taxpayer money to cover projected losses on reverse mortgages in fiscal 2010.  The losses are not related to fraud but to falling home values, HUD Secretary Shaun Donovan said at the time. That’s because by the time a reverse mortgage needs to be repaid, the value of the house could have dropped and the FHA-insured lender is left with no choice but to recoup less money than it loaned out.  Donovan said the Obama administration is requesting a subsidy instead of raising charges for seniors.

FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News FHA, FHA loans, FHA mortgage, reverse mortgage, reverse mortgages

Mortgage industry groups lowered their forecast for 2009 home loan originations by more than 25% as higher FHA mortgage rates stifle mortgage refinancing activity.  MBA estimated that FHA lenders will make $2.03 trillion in new home loans this year, down by more than $700 billion from its forecast in March.  The Washington-based group attributed $84 billion to reduce mortgage lending on home purchases.  The rest of the decline would be from fewer FHA refinance loans and “very low” volumes on an affordability loan program overseen by mortgage agencies FHA, Fannie Mae and Freddie Mac, MBA said in a statement.

FHA mortgage rates have risen from record lows since the MBA’s prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs.  Read the original article online > FHA Mortgage Rates Rise

FHA Loan Updates, FHA News, Mortgage News FHA lenders, FHA loan, FHA Mortgage Rates, fha refinance loans, mortgage lending

The House of Representatives passed a bill containing the long awaited rehabilitation to the FHA Hope for Homeowners loan program late last week and the Senate will likely deliberate early shortly. The mortgage relief measure are attached to H.R. 1106, a controversial home financing bill that would grant bankruptcy judges the authority to cram down borrowers’ mortgage loan balances when they file for a Chapter 13 bankruptcy. 

FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News FHA Hope for Homeowners loan, Mortgage Relief

According to the Mortgage Bankers Association’s quarterly delinquency report, 2008 saw the percentage of FHA loans 90-plus days past due reach 4.11 %, its highest ever level. The Department of Housing and Urban Development’s (HUD) figures are even higher. The seasonally adjusted percentage of FHA home loans that are 90 days or more delinquent rose more than anticipated.

FHA News, Mortgage News

Until recently, FHA has allowed cash out refinancing for homeowners up 95% loan to value if the borrowers have made their mortgage payments on time for at the prior least twelve months.  The seasonally adjusted percentage of FHA home mortgages that are 90 days or more delinquent increased to 4.11%.  The Washington Post recently that these instant defaults nearly tripled in the past year alone and more than quadrupled among FHA home refinancing.

FHA refinance loans now make up two-fifths of all the agency’s instant defaults, according to the Washington Post article, some lenders have singled out cash out refinance loans as especially risky. With conventional loans, many FHA lenders now offer cash out mortgage only to borrowers with high credit scores and significant equity in their homes.  Read the complete FHA article > FHA Rumored to Tighten Cash Out Refinancing Guidelines

FHA Loan Updates, FHA News 95% loan to value, cash out refinance loans, FHA, FHA lenders

The government-sponsored mortgage giants released revisions in their loan work-outs last week.  Many mortgage servicers could be pushing as much as $200 billion of Fannie Mae and Freddie Mac home loans through new standard mortgage loan modification procedures.   However, these foreclosure prevention plans designed by the Obama administration continue to miss a large portion of distressed homeowners who are unable to qualify for traditional or FHA mortgage refinancing.  

Many of these borrowers are beginning to panic, because it’s starting to sink in, that the government is not going to finance these non-traditional bail-outs as foreclosure rates are continuing to rise among the groups of homeowners who carry the burdens of jumbo mortgage loans and bad credit scores.

FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News bad credit, FHA mortgage refinancing, mortgage loan modification

FHA Mortgage Leads – Watch Lead Planet Video

Lead generation specialist, Bryan Dornan discusses the opportunity for mortgage brokers and lending companies to purchase quality real-time leads. FHA Lead buyers can select from exclusive internet leads to live transfer leads that connect applicants directly with the loan officer or negotiator. Visit us online for FHA mortgage leads and complete a quick request form and one of their account executives will follow up with you shortly.

FHA Loan Product Promo, FHA Loan Updates, FHA Marketing FHA Lead buyers, FHA mortgage leads

The Federal Housing Administration used to be known as a place for low-income borrowers with tarnished credit histories. But now, it has become a destination for borrowers whose credentials are respectable, but not stellar.

Is It Better to Buy or Rent? To qualify for the best FHA mortgage rates on a new or refinanced mortgage, you need to have a top-notch credit score and a substantial down payment or home equity. But if you have less than perfect credit and less than 20% in home equity, an important threshold, you’ll have to pay a lot more. And that’s why many of those borrowers are avoiding conventional loans turning to the FHA.

FHA requires down payments of only 3.5% and has less stringent credit requirements than conventional mortgages backed by Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies. FHA mortgage loans also have become one of the least expensive alternatives for new mortgages and refinancing, given the increase in fees tacked onto traditional loans.

“Just about anyone that is putting down less than 20% needs to consider FHA home financing,” said Joe Rogers, executive vice president of Wells Fargo Home Mortgage. “That doesn’t mean they need to take it, but they should consider it.”

The FHA, which was created during the Great Depression, does not make loans, but insures mortgages that meet its guidelines. Because the FHA. is the only viable option for a lot of people, its loans now account for a much larger percentage of all mortgages. In 2005 and 2006, at the height of the housing boom, only 1.8 % of all mortgages were FHA-backed, according to Inside Mortgage Finance. Last year, that number ballooned to 17.1 %. The FHA now insures 4.8 million single-family mortgages worth about $550 billion. Historically, FHA home loans carried a certain stigma. They were viewed as hard-to-obtain loans for low-income consumers with checkered credit histories and small down payments. They also tended to be more expensive.

But in the current market, the opposite is often true. Qualifying for a regular mortgage has become more expensive, sometimes prohibitively so, given the many fees that are now layered onto conventional loans backed by Fannie Mae and Freddie Mac.  The FHA loan fees are generally levied on borrowers deemed to be more risky. The charges depend on your credit score and the amount of money you’re borrowing relative to the value of your home. But they tend to hit people with credit scores under 700 and less than 20% in home equity. Carrying a home equity loan may result in extra fees, as will taking cash out of your home when you refinance.

The additional charges aren’t the only hurdle consumers may face. Borrowers with less than 20% in home equity must also purchase private mortgage insurance. The insurance has become much more difficult to qualify for and more expensive, especially in areas where home values have declined the most.

FHA borrowers will not avoid mortgage insurance, but they will escape the extra fees, lenders and mortgage brokers said. And that’s why, for many families, the FHA program has become the most economical option.  If you’re having trouble securing a new mortgage or refinancing an existing mortgage, here is what you need to know about the FHA loan program:

Generally speaking, your payments, including taxes and insurance, should not exceed 31% of gross income. When you include car payments, student loans and other obligations, your total debt shouldn’t exceed more than 43% of gross income. But these thresholds are only guidelines. So if you have a larger than required down payment, or a good amount of money in the bank, you may be able to bend these rules. The FHA does not impose any income limits or credit score minimums, but people with credit scores below 500 must have at least 10% of equity in their home to be eligible. (The average FHA borrower has a score of 640.)

But to keep default rates down, many FHA-approved lenders have recently started to impose their own credit score minimums — above and beyond the F.H.A’s. guidelines — and are requiring more stringent income documentation. Clearly, they’re trying to protect themselves: if a particular lender’s default rates exceed neighboring lenders, they can be audited and even removed from the program.“In the last month and a half, there has been a dramatic increase in the minimum credit score required,” said Michael Moskowitz, president of Equity Now, a New York mortgage lender that makes FHA loans. “Some went to 580 and others went to 620.”

Whether an FHA loan will cost less depends on your personal situation. Currently, however, borrowers with credit scores less than 700 with less than 20 % in home equity often come out ahead with FHA loans. At the very least, lenders and brokers say it pays to compare the costs of an FHA-insured loan versus a conventional mortgage if you fit into this category.  In most cases, the total costs of FHA loans including the interest rate and mortgage insurance become less than a traditional mortgage’s costs as your credit.

FHA News, Mortgage News

When it was passed last year as part of the FHA reform package, the Hope for Homeowners program was a federal mortgage refinancing plan designed to help some 400,000 people who now have toxic loans. In fact, the program has been a complete bust. As of January 31st, HUD figures show that there have been 465 Hope for Homeowners applications — and not one approval from the government.  Hope for Homeowners has gone nowhere because it’s complex. It requires FHA mortgage lenders to take a loss and borrowers to share profits and make big payments to Uncle Sam. While the intention is good, the program is just too complex to succeed.

Now we find an effort to revamp the Hope for Homeowners program and the betting here is that few FHA loans will result.

Under H.R. 1106: The Helping Families Save Their Homes Act of 2009, the program will become MORE restrictive if the legislation passes as it is now written. Huh? How can that help anyone?

Once again, the intention is good but the result is doomed to failure. For instance, the legislation requires that a borrower does not “intentionally defaulted on the existing FHA mortgage loans.”   Translation: If you’re stuck in an over-priced house you can’t buy a replacement home and then default on house #1. This seems logical, except that when someone applies to buy that second home they have not yet defaulted on the first house. If default comes at all, it will come later.

Get more Jason Cardiff Tips online>  Read more of the  article >  Is the FHA Planning to Penalize Borrowers?

FHA Loan Updates, FHA News, Published Loan Articles

In a recent article, FHA Loan Pro’s weighed in on the HUD counseling mess as homeowners with FHA loans now have new counseling choices to consider. If you are a homeowner in default HUD counselors are not supposed to charge you. It seems that recent reports suggest something else is going on. 

In a letter to FHA mortgage lenders dated February 19th, HUD says:  “HUD had previously sent guidance to HUD approved counseling agencies indicating that fees may not be charged for clients needing homeless counseling or default counseling.   “It has come to HUD’s attention that some Housing Counseling agencies have been asking the real estate broker or agent on a short sale to provide their agency a part of the Real Estate Brokers sales commission to pay for the clients foreclosure counseling session.   “Please be advised that splitting the Real Estate Brokers fee is not a permissible funding source for foreclosure counseling, and may be a violation of RESPA as well as the conflict of interest provisions of 24 CFR Part 214. It may also be grounds for termination from HUD’s Housing Counseling program.  “HUD approved Housing Counseling agencies, their affiliates, and branches that are collecting fees from real estate agents for the referral of clients and to assist with the costs of foreclosure counseling must terminate this practice immediately.”

In 2007 HUD, under the Bush Administration, announced that “funding for housing counseling is a major concern among participating agencies. In a change in this final rule, HUD is clarifying that it will allow for participating agencies to accept funding from lenders, as long as the relationship does not create a conflict of interest and that the relationship is disclosed to the client.”

FHA Loan Pros complained about this rule loud and often and in the summer of 2008 Congress banned lender-paid counseling. In October of 2008, HUD complied with the new law and announced that “lenders can no longer pay HUD-approved counseling agencies, directly or indirectly, for counseling services through either a lump-sum payment or on a case-by-case basis.”  Read the complete article at FHA Mortgage Programs

FHA Loan Updates, FHA News, Published Loan Articles FHA loan, FHA mortgage lenders

The government anticipates only 20,000 troubled borrowers will apply to refinance into more affordable home loans by next fall under a new mortgage relief program passed by lawmakers over the summer. The $300 billion ‘Hope for Homeowners’ program was launched October 1^st 2008.

FHA rolled out the new loan program, Hope for Homeowners loan that was designed by lawmakers eager to respond to the mortgage crisis, the Congressional Budget Office had projected it would let 400,000 troubled homeowners swap risky home mortgages for conventional 30-year fixed rate loans with lower rates. 

But according to the Federal Housing Administration, the early results are discouraging: the government received only 42 applications in the program’s first two weeks. The low turnout was first reported by the industry newsletter Housing Wire. Since the FHA loan applications take about 60 days to process, no home loans have been approved yet.  The FHA Loan Blog believes that the mortgage lenders are holding up the program with their guideline tweaks, like higher credit scores.

FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News Federal Housing Administration, FHA, FHA loan, foreclosure, Hope for Homeowners, Mortgage Relief

Nancy West, a marketing and outreach specialist at HUD’s Santa Ana, Calif.-based office, said there are companies making solicitations with the claim that non-approved originators can do FHA mortgage loans and get paid for them. “I’m here to tell you [that] you cannot,” she said, adding it creates unfair competition with originators who do things properly.

Among the features of the FHA mortgage program is that no credit score is required and that manual underwriting is permissible. However, Ms. West said, there are FHA mortgage lenders who are imposing stricter guidelines. FHA cannot control that, she said. There are those that do not have stricter requirements. If a correspondent only works with a mortgage lender who only uses automated underwriting, they need to be aware there are FHA loans that the system will never approve. Ms. West suggested having an alternative sponsor who manually underwrites.

While the qualifying ratios for FHA loan programs are normally 31% and 43%, Ms. West said there have been loans approved with a backend ratio as high as 68%. It is important that the originator know what program is best for the customer, not only among the FHA offering but the programs at other federal agencies as well, she said. Among the bogus information being given out by lenders is that the borrower must take the property out o a living trust. That is not true, Ms. West said, noting that taking the property out of trust could trigger legal issues.

FHA loans can also be used on manufactured housing as long as it meets agency requirements. “We are the game in town for manufactured housing,” she said. HUD needs mortgage brokers’ help to get the word out about changes in the program to Realtors, who are not aware of items no longer required to be fixed, such as missing handrails, cracked window glass, minor plumbing leaks, poor workmanship and defective floor coverings.

The temporary loan limit increase expired on Dec. 31. Ms. West suggested that mortgage brokers and loan officers keep on top of sponsors to ensure their loans are approved by the deadline. As for the Hope For Homeowners program, while Ms. West said the parameters make certain that only a small number of borrowers are eligible for, there are some benefits. “It is a tool and we will be able to help some folks with it, but it is not a cure all.” The borrower gets to keep a home he or she can no longer keep. They are not paying to make FHA money, only what they owe. Most of the originators of these loans are servicers. The originator is allowed to charge one point only; no administrative or add-on fees allowed. “I’m not saying don’t do it, but don’t make it your meal ticket,” said Ms. West.  Article Written By Brad Finkelstein.

FHA Loan Product Promo, FHA Loan Updates, FHA News, Mortgage News FHA loan, FHA mortgage, FHA mortgage lenders, FHA mortgage loans

Yes credit is tight and potential home buyers might think they need a significant of cash or a superlative credit score to wade into the devastated housing market. FHA eliminates some of the lender risks to provide mortgages because it will pay a claim to the lender in the event that a homeowner defaults on their loan. 

Until 2008, FHA loan programs were capped so low that the program was out of step with the real price of a house. But in February 2008, the FHA loan limits in the high cost housing markets rose from $362,750 to $729,750.  But in 2009 the FHA mortgage limits are being down-sized again.  FHA announced the new ceiling in the high cost markets will be $625,500. FHA loans in 2009 will cap out at 115% of the median home price in a county or metropolitan area. Still, huge swaths of the housing market will remain, as never before, eligible for an FHA home mortgage.

Watch This FHA Home Loan Video >

o    FHA home loans can only be originated from a FHA-approved mortgage lender.

o    Down payment requirements are minimal. Buyers need only 3.5% of the house’s price tag.

o    The down-payment can be a gift from a family member, employer, local charity, or local government program.

o    FHA loan programs enable all ranges of credit scores with compensating factors.

o    You must have a 2-year employment record. The new FHA loan payment must be less than 31% of your income, and debt to income ratio is usually less than 43% of your income.  Read the complete article at >

FHA Loan Updates, FHA News, Mortgage News FHA Home Loan Video, FHA home mortgage, FHA loan limits, FHA loan programs, FHA mortgage limits

In most cases, FHA home loans are more flexible than conforming mortgage lenders regarding credit qualifications and home equity requirements for purchasing or refinancing. In fact, FHA loan guidelines enable borrowers with bad credit scores to re-establish their credit:

• Must be at least 2 years since the bankruptcy was discharged 
• All judgments must have already been paid
• Tax liens must been satisfied or appropriate arrangements
• Must be at least 3 years foreclosure or a deed-in-lieu has been resolved

FHA Loan Product Promo, FHA Loan Updates bad credit, FHA loan, home equity

Tax liens may remain unpaid provided the mortgage company subordinates the tax lien to the FHA insured home loan. If any regular payments are made, they must be included in the qualifying ratios.  Since the IRS routinely takes a second mortgage position without the necessity of independent documentation, eligibility for FHA mortgage insurance will not be jeopardized by outstanding IRS tax liens remaining on the property unless the FHA mortgage lender has information that the IRS has demanded a 1st mortgage position.  Read the complete article >Tax Lien Issues with FHA Mortgage Loans.

Published Loan Articles FHA mortgage loans, second mortgage

The 203k FHA mortgage is a unique loan that enables a new homebuyer to finance the purchase and rehabilitation of a house in the same home loan.  A part of this FHA loan is used to pay off the seller and their mortgage lender.  While the remaining FHA home loan amount is wired to an escrow account set up to fund the home remodeling and rehabilitation.

HUD has specific guidelines for these FHA home improvement loans have follows details:

• The house must be at least twelve months old. 
• The cost of rehabilitation must be at least $5,000, but the total property value including the cost of repairs - must fall within the maimum limit for FHA loans. 
• The 203(k) FHA loan must follow many of the 203(b) eligibility requirements.  

Talk to a FHA mortgage lender about specific home improvement plans, contractor structural guidelines and your eligibility as a borrower.

FHA Loan Product Promo, FHA Loan Updates FHA 203k loan, FHA mortgage lender, home improvement loans, home remodeling

To get a mortgage now, you’ll have to make a down payment and document that you have the income and reserves to make your mortgage payment, run your household and still handle unexpected expenses.  Subprime mortgage loans that were offered to borrowers with questionable qualifications during the housing boom have dried up because lenders — and the investment firms that bought the mortgages — can no longer count on appreciating home prices to bail out bad loans. Now FHA mortgage lenders and brokers must play by the rules of Freddie Mac and Fannie Mae, which guaranteemortgages that meet their criteria so that home financing investors will want to buy them in the secondary market.

Mortgage Lending Guidelines Tighten! 

FHA mortgage loans are backed by the Federal Housing Administration have also regained favor as an option, not just for credit-challenged borrowers for good credit borrowers looking for low down payments.  The FHA loan programs gave Kyle and Tracy Spear of Swampscott, Massachusetts, north of Boston, an opportunity to buy a larger home with less of a down-payment. Last summer, the couple had planned to subdivide their property in Boston and sell the home plus a separate lot. But the city and their neighborhood nixed the subdivision, and they ended up netting just $15,000 on the sale. For two months, Kyle, 38, Tracy, 37, and their three boys — Kyle, 4; Tyler, 2; and Jack, 11 months — lived with friends and family to save money until they found their next home, a 2,800-square-foot house with four bedrooms that cost $540,000. They qualified for a thirty-year jumbo mortgage loans with a fixed rate of 6.875% backed by the FHA. And because the FHA required a down payment of only 3%, they had to put down just $16,000.

Prove it. The days of “Take my word for it” are over, and stated-income loans, are very difficult to find. Lenders will ask you for at least two months of financial account statements, two years of tax returns and even verification from employers that overtime, commission or bonus income will continue.

FHA mortgage lenders are also scrutinizing more carefully the ratio of your debt to income. Beginning February 1, 2009, Freddie Mac is imposing a limit of 45% of all pretax income for all debt; borrowers with a credit score of 740 or better will get the best rates. The FHA refinance guidelines are even tighter: Mortgage debt may not exceed 31% of your income, and total debt can’t top 43%. The FHA doesn’t impose a credit-score threshold.

Home loans with no down payment, or those that combine first and second mortgages, such as the 80-20, are also gone. Home mortgages backed by Fannie and Freddie require a minimum down payment of 3% to 5%. The bigger your down payment and the better your credit score, the better your interest rate. If you put less than 20% down, you’ll pay private mortgage insurance, or PMI.  But here is something to consider; If home prices have been falling in your area, you may not be able to get PMI, and if you can, you’ll have to ante up 10% to 15% for a down payment.

Congress has authorized the FHA, which relies on its own program of mortgage insurance, to take up the slack in declining markets, says Meg Burns, director of the FHA’s Office of Single-Family Program Development. The FHA can insure loans up to the same amount as Fannie and Freddie. Beginning January 1, the limit is 115% of a metro area’s median home price, up to $625,500, and the minimum down payment is 3.5%, up from 3% in 2008. FHA mortgage loans have become reasonabbly affordable.

According to HSH Associates, at the beginning of November the national average rate on a 30-year fixed-rate loan was 6.4%. FHA home loans had a 6.7% mortgage rate; the expanded jumbo interest rate was 6.8%, and the traditional jumbo mortgage rate was 7.9%. Adjustable interest rate FHA home loans didn’t offer much of an advantage: The interest rate on a 5/1 ARM was 6.4%, and on a one-year ARM it was 5.8%.  Read the complete article >.  

FHA Loan Updates, FHA News, Mortgage News, Published Loan Articles Federal Housing Administration, FHA home loans, FHA loan programs, FHA mortgage lending, FHA mortgage loans, jumbo mortgage loans

During the subprime mortgage boom, the Federal Housing Administration, created in 1934 to help lower-income and 1st-time buyers purchase homes, all but sat out the party.  Borrowers abandoned the FHA in favor of conventional home mortgages that were both easier to qualify for and less expensive. The agency does not itself issue mortgages but it insures lenders that do, and its insurance pool is financed by premiums paid by homeowners who use its programs.

Now, as credit tightens, FHA is the sudden star of the nation’s housing market. In September alone, it endorsed over 96,000 new home loans, more than triple the number it approved in the same month last year, federal data shows. But some housing industry experts worry that FHA may soon be hit by a wave of mortgage-related fraud and abuse that it is ill prepared to deal with.  Over the years, the Department of Housing and Urban Development, which oversees FHA, has been slow to weed out mortgage lenders that abuse or defraud the agency and profit through means like certifying unqualified borrowers. There are also growing concerns that subprime fraud artists have set their sights on FHA. “It looks like an incoming tsunami,” said HUD’s inspector general, Kenneth M. Donohue

The fallout for both homeowners and taxpayers could be substantial if FHA becomes the next housing domino to teeter.In 1991, Congress was forced to increase the premiums that FHA homeowners pay to the agency’s insurance fund when it was overwhelmed by claims from bad mortgages. And a HUD audit released this month suggests that fund may soon face trouble again; over the fiscal year, its capital ratio dropped to 3 percent, from 6.4 percent, reflecting a sharp increase in claims. By statute, that capital ratio must be at least 2 percent.

In addition, principal and interest on mortgage-backed securities containing FHA-insured loans are guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible if the mortgages underlying those securities fail.Howard Glaser, a onetime HUD official who is a mortgage industry consultant in Washington, said that FHA had largely been treated as a stepchild. Over the last five years, for instance, the agency’s staffing levels have remained essentially flat. “If we don’t have the capacity to monitor systemic risk in FHA, then we are in real trouble,” he said.

HUD officials did not respond to repeated requests to be interviewed for this article. But a department spokesman, Lemar C. Wooley, said in a statement that HUD was effectively dealing with F.H.A.-related fraud and abuse. “For decades, the FHA has successfully undertaken measured risks while consistently evolving its programs to protect the integrity” of the insurance fund, Mr. Wooley stated.  In many ways, F.H.A. is far better suited to deal with fraud than lenders that issued subprime loans. FHA borrowers need to have down payments and are expected to meet strict criteria to make sure they are capable of paying their mortgages.

But HUD’s weak point has long been its oversight of the thousands of mortgage lenders and other companies that effectively act as outside contractors in originating and endorsing FHA home loans, studies by the Government Accountability Office and others have found.  To work with the agency, companies must meet financial standards. It can take years to dislodge firms suspected of creating problems for the system, however, according to federal studies and as demonstrated by some recent cases.

In October, for instance, federal prosecutors persuaded a judge in Federal District Court in Brooklyn to block a lender, Madison Home Equities of Carle Place, N.Y., and its owner, Nadine Malone, from approving any more FHA mortgages. In court papers, prosecutors charged that the firm had, among other things, falsified data to certify unqualified borrowers and artificially inflated the prices of homes it sold. It was not the first time that federal officials had tried to rein in Madison. Since 1996, federal records show, HUD, on separate occasions, has imposed sanctions on the firm, fined it, sued it and even debarred it for a time as an approved FHA agent.  Through it all, the firm and Ms. Malone denied they had done anything wrong and, after Madison’s debarment ended in 2005, it worked again with FHA Prosecutors now charge it abused the system, which Ms. Malone denies. Whatever the case, some recent home buyers who got FHA insured loans through Madison face foreclosure because, prosecutors say, the firm overstated their resources.  “We are barely hanging on,” said Julius A. Collins Jr., who bought a house last year in Ellenville, N.Y. He said he was surprised, given his family’s finances, that he qualified for a FHA home loan, adding he was unaware of charges against Madison.

Part of the problem, experts say, is that mortgage companies like Madison and others that act on FHA’s behalf face a conflict. While they must abide by HUD guidelines to qualify borrowers, the more loans they approve, the more money they make.  To track FHA mortgage lenders, HUD monitors how frequently their loans are defaulting, a sign that a firm may be certifying unqualified borrowers or possibly even engaging in fraud. But while officials can take action when a firm’s default rate reaches twice the local average, they often act after it is far too late, said several mortgage industry experts. “You can find lenders with ridiculous default rates,” said Brian Chappelle, a consultant in Washington.

For example, federal officials began to review one lender, Great Country Mortgage Bankers of Coral Gables, Florida five months after its default rate exceeded twice the average, according to Mr. Wooley, the HUD spokesman. But it was not until last month that HUD officials ended the firm’s ability to act as an FHA agent. By then, its default rate was more than 13 times the local average, federal data shows. Mr. Wooley said a HUD inspector general’s review of the firm led to the delay.  Great Country’s situation is by no means unique. About 80 of the 1,800 mortgage companies authorized to endorse FHA loans, including some no longer in business, have default rates from 2 to 11 times the average of local lenders, federal data shows. Madison’s rate was four times as high as the local average, data shows.  Both Mr. Glaser and Mr. Chappelle, the two industry consultants, said they believed HUD needed to find ways to screen out companies issuing bad credit mortgage loans much earlier in the process. 

HUD can take a variety of actions when it suspects a company of abusing FHA, such as referring the most egregious cases to the Justice Department for criminal or civil action. But it can also bring administrative action against lenders and others through a HUD panel, the Mortgagee Review Board, composed of top department officials.  The review board can penalize or debar F.H.A. participants. While its power to impose fines is limited, the panel can take other substantial financial actions. For example, it can require a lender to reimburse the agency’s insurance pool for claims paid out to it on mortgages that the company should not have approved.

In addition, it can require a FHA lender that has violated guidelines in approving loans to indemnify FHA against future losses if those become bad mortgage loans. In the 2008 fiscal year, which ended in September, the review board handled 95 cases, about the same number it looked at during the four-year period from 2004 to 2007, federal data shows. And in recent years, it has handed out some substantial penalties.  But in other cases, the review board accepted fines or penalties smaller than those recommended by HUD auditors. For example, a 2006 HUD inspector general’s audit of a Louisiana-based home loan lender, America’s Mortgage Resource, found that a company official had been involved in a practice by lenders and home builders that was once widespread and is now banned — the use of an unapproved charity to funnel down payments to home buyers so they could qualify for FHA loan products.  Read the complete article >

Published Loan Articles 1st time homebuyer, conventional home mortgages, FHA home loans, FHA home mortgages, FHA homeowners, FHA insured loans, FHA mortgage, HUD, new home loans, subprime mortgage

Clearly the Federal Reserve believes that lower interest rates can help revive the sluggish housing markets.  FHA home loan rates have dropped again to ridiculously low levels and home refinancing has become attractive again.  With the Fed slashing interest rates and the US government claiming to jump-start the housing with buy-downs that could lower 30-year fixed rate FHA mortgage loans to 4.5%.   Visit FHA Loan Blog for the latest take on mortgage news.

Mortgage Rates Drop to Lowest Level Ever Recorded by Freddie Mac!  Watch this FHA Video >

While mortgage delinquency is expected to nearly double by next year, the bottom of the delinquency cycle may occur by mid-2010.  Borrowers who were delinquent at least 60 days on their mortgages accounted for 3.96 % of all mortgages during the third quarter, Trans Union reported today.  Home loan delinquency rose from 3.53 % in the second quarter and has soared from around 2.57 % a year earlier. 

For subprime mortgages, fixed rate foreclosure starts raised 16 basis points to 2.23% and subprime ARM foreclosure starts dropping 16 basis points to 6.47%. FHA loan foreclosure starts were unchanged at 0.95% and VA foreclosure starts increased two basis points to 0.59%, all on a non-seasonally adjusted basis.” 

FHA News, Mortgage News fha home loan rates, FHA Loan Blog, FHA mortgage loans, fixed rate foreclosure, Home loan delinquency, subprime mortgages

FHA loan programs continue to support the brunt of the mortgage product that focus on refinancing homeowners facing foreclosure.  The FHA Secure looked great on paper in 2007 when HUD rolled it out, but very few lenders offered the product to the borrowers who needed.  HUD just rolled out the Hope for Homeowners product and hopefully these FHA loans will provide the mortgage relief to the millions of homeowners who need to refinance or get a loan modification that provides an affordable monthly payment.

In a recent Reuters article, a congressionally appointed panel that oversees the Treasury Department’s $700 billion financial rescue fund is expected to release a report on Wednesday highly critical of how it has been handled, The Wall Street Journal reported on Tuesday.  The Journal, citing people familiar with the matter, also said the panel would push the Bush administration to act more aggressively to prevent foreclosures.  The newspaper said the oversight report due on Wednesday is not expected to contain new findings. It said a draft of the report posed 10 questions, pressing officials for a clearer strategy and asking whether there is sufficient accountability and why more has not been done to prevent foreclosures.  Elizabeth Warren, the Harvard University law professor who heads the congressional oversight panel, is scheduled to testify before the U.S. House of Representatives Financial Services Committee on Wednesday and is expected to discuss the report.

Rep. Jeb Hensarling, a Texas Republican who opposed the financial rescue bill and also serves on the oversight panel, said in a statement he could not sign the report. “In my role on the TARP (Troubled Asset Relief Program) panel, my top three goals are to ensure that the program works, to ensure that decisions made are based on merit and not political considerations, and most importantly, to ensure that taxpayers are protected,” Hensarling said.  “I am hopeful that the oversight panel will eventually be an effective vehicle for these goals to be met but thus far the jury is still out on that,” Hensarling said.  Caleb Weaver, a spokesman for the oversight panel declined to comment on the Wall Street Journal’s report.

FHA Loan Updates, FHA News, Mortgage News FHA loans, FHA Secure, Hope for Homeowners, loan modification, refinance