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Is the Government Shifting Back to Risky FHA Loan Practices?

September 9th, 2013
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Finding companies that offer FHA loan programs with poor credit scores may have just become more prevalent. According to the Wall Street Journal, the Obama administration wants to create a mortgage market that is more forgiving to borrowers who lost their homes due to the recession, an effort that could widen the pool of potential homeowners. Recently HUD implemented some change that enables certain applicants who went gone through a foreclosure or bankruptcy to be considered for a FHA mortgage. The applicants must have been working on improving their credit to become eligible to receive a new house loan insured by the Federal Housing Administration after waiting as little as 1 year.

To be eligible for the latest FHA home loan mortgage, borrowers must show that their foreclosure or bankruptcy was caused by a job loss or reduction in income that was beyond their control. Borrowers also must prove their incomes have had a “full recovery” and complete housing counseling before getting a new home loan. The Obama administration has made an effort to improve the home finance market to make it qualifying more achievable to people who lost their property to a short-sale or foreclosure due to the Great Recession.

Related Mortgage Articles

  • More Home Finance Companies Announce Expanded FHA Mortgage Loans

The FHA already offers among the most flexible lending standards today, requiring down payments of just 3.5%. “It’s difficult to see how lenders would even consider doing mortgages with higher risk” in the current environment, said David Stevens, the chief executive of the Mortgage Bankers Association, who served as the FHA’s commissioner from 2009 to 2011. Lenders aren’t going to expand credit “while you’re suing them and threatening them over minor errors.”

Shaun Donovan, the secretary for the Department of Housing and Urban Development, made it clear that FHA has no plans to promote risky home mortgages. He said, “What we are talking about is getting back to responsible, plain-vanilla lending,” he said in an interview. “We believe these are low-risk loans that can be made safely.” In the four years ended last September, some 3.9 million homes had been lost to foreclosure. About 1 million borrowers who went through foreclosure during the crisis have already waited the required three years to be eligible for FHA home loans, and by early next year that number could rise to 1.5 million, according to estimates from Moody’s Analytics. The government through Fannie Mae, Freddie Mac or federal agencies has guaranteed as many as nine in 10 new mortgages in recent years. But over the past four years, banks have had to buy back tens of billions of defaulted loans as Fannie, Freddie and the FHA faced mounting losses.

The article was written by Nick Timiraos. Read WSJ original article.

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FHA News, Published Loan Articles

1st Time Home Buyers Select FHA Loans

May 6th, 2013
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Since their inception in 1934, the Federal Housing Administration has been a favorite for first time home buyers seeking financing. People are attracted to FHA because they are considered safe and affordable with only a 3.5% down-payment required. “In fact, in the past year a big majority of FHA insured purchase loans more than 75% have gone to 1st time house buyers.”  The fact is that many new buyers are still attracted to the bad credit FHA mortgage.

The main focus of the FHA mortgage program is straight-forward: Qualified borrowers can buy a home with just 3.5% down. That means for a $150,000 property a buyer needs just $5,250 in cash plus closing costs. It is worth pointing out that the FHA is not a lender.

Down Payment Requirements: First-time FHA borrowers are generally required to put down just 3.5% of the sales price but there are exceptions: if you have a credit score below 580 then the program requires 10 % down. This is still amazing though that FHA still approves mortgages with bad credit on fico scores as low as 500. Also, HUD has proposed that if you borrow more than $625,500 then at least a 5% down-payment will be required. As long as one of the units is owner-occupied, FHA loan programs can be considered. This means first-time owners can also become first-time investors with just a 3.5% down-payment if they meet FHA guidelines.”

Gift Funds Allowed: FHA borrowers may need less cash up front if they can obtain a gift from family, friends, or other sources. “Gifts can be equal to some or all of the down payment, in fact gifts that exceed the down-payment are allowed,” said Brousseau. “The extra money counts toward reserves.”

Credit Score Requirements: In recent months the typical FHA borrower has had a 696 credit score, however the FHA also insures loans for borrowers with lower credit scores. “The FHA has recently moved toward tighter credit standards,” said Brousseau. “As of April 1st, when the debt-to-income ratio exceeds 43% and the borrower has a credit score of 620 or less the loan application must be manually reviewed. Manual underwriting can be useful because it allows FHA home loans lenders to consider compensating factors when looking at a loan.”  Read the complete WSJ article online.

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1st Time Home Buyers, Published Loan Articles

Low FHA Rates But Higher Mortgage Insurance Premiums Forecasted

December 5th, 2012
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This has been a monumental year for low interest rates and FHA loan origination. The interest rates have never been lower, but FHA reserves have been nearly depleted once again as loan defaults surged last quarter. Any decline in a home’s value leaves homeowners upside down which for some provides little incentive to keep making the payments when a family’s income declines. Due to this factor and the fact that FHA lenders are more lenient on credit history than conventional loans, the FHA insurance program has been losing money due to defaults and foreclosures. In response FHA is increasing the premium on its mortgage insurance sometime in 2013.

FHA loans currently require the borrower to pay the monthly mortgage insurance premium for a minimum of five years, after which time, the premium may be waived if the loan to value ratio has fallen to 78%; however, effective next year, FHA mortgages will require borrowers to pay the monthly mortgage insurance premium for the life of the loan. All signs point towards premiums being raised next year. The likelihood of FHA offering home equity credit lines for bad credit are about the same as premiums not rising in the year to come. There are just too many delinquencies and defaults for FHA not to hike the mortgage insurance premiums.

The mortgage insurance premium effectively raises the interest rate 1.25%. When adding the mortgage insurance premium to a 30 year fixed rate for an FHA loan at 3.25%, the real rate is closer to 4.5%. The upfront mortgage insurance premium has been 1.75% of the loan amount. On a $400,000 loan, that amounts to $7,000 but the good news is that it can be financed by adding that fee to the base loan amount; therefore, the new loan would become $407,000.

There are numerous considerations when exploring mortgage options; borrowers are advised to consult with one or more mortgage professionals who are experienced in both FHA and conventional loans before making a final decision. Read the original Mecury news article.

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Published Loan Articles

The New HARP and Higher FHA Loan Limits

November 29th, 2011
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Mortgage lenders across the country have been talking about the new HARP loans and the higher FHA loan limits that were raised to help consumers that reside in high cost regions. CoreLogic released new data showing that seven out of ten homeowners are below 80% loan to value.  That means that this group of consumers have less than 20% home equity in their property. CoreLogic also reported that these struggling group of homeowners have higher home loan interest rates and in many cased these consumers do not meet the current guidelines that lenders are requiring on refinance transactions. Obama recently signed off on extending the Home Affordable Refinance Program. This is a government sponsored refinance program for borrowers that have a mortgage owned by Fannie Mae or Freddie Mac. According to Nationwide, the HARP loan provides fixed rate refinancing for borrowers that meet the requirements on a 1st mortgage. The HARP: refinance does not allow borrowers to include a 2nd mortgage so many borrowers who have two liens on their house will not be eligible.

  • Higher loan amounts will help consumers in high cost areas qualify for affordable FHA mortgages.
  • There are nearly 22 million borrowers, or 45% of all borrowers, that have mortgages with an 80% or more loan-to-value ratio, and 69% of those mortgages have interest rates higher than 5%. Conversely, only 54 % of borrowers who have less than 80% loan-to-value have above-market interest rates. While above-market interest rates make home refinancing loans at today’s record low interest rates a cost-effective step for qualified homeowners, it can be more difficult for borrowers with above-average loan-to-value ratios to qualify for refinancing.
  • The top five states combined have an average underwater mortgage ratio of 41.4%, while the remaining states have a combined average negative equity ratio of 17.6%.

Read the original article on underwater mortgages from Nationwide.

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FHA Loan Updates, HARP Loans, Published Loan Articles

2012 FHA Loan Limits to Fall Soon

August 22nd, 2011
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Lenders and brokers have started to brace themselves for reduced FHA limits coming on September 30th.  MBA, NAR and other housing activists agree that lower loan limits will make it tougher on FHA financing in states with high cost regions. Many FHA loan companies have begun using the reduced FHA loan limits because in most cases the loan process takes 30- 45 days to close.  The common misperception is that it only applies to high-end homes, he said.

2012 FHA loan limits continues to be a highly debated a subject on Capitol Hill.  HUD lifted nationally limits from $417,000 to $625,000 in February 2009 and the FHA limits were extended last year until October 1st, barring action from Congress. The limit was raised from 115% of each county’s median home price to 125% of the median, and is now coming back to 115%. That’s an average reduction of $68,000, making an estimated 5 million homes ineligible for government sponsored-enterprise financing, he said.

FHA is poised to lower loan limits in the country’s high cost regions while limits would remain unchanged in most other parts of the nation. Lower FHA mortgage limits will affect less than 5% of the markets nationally, but it will do doubt have a ripple effect for the struggling housing sector.

Zach Lowe, spokesman for the Washington, D.C.-based Coalition for Sensible Housing Policy, said FHA insurance assists people who can’t afford a large down-payment needed to qualify for traditional home purchase loans. In 2011, the FHA was insuring mortgages up to $729,000 nationally, or 125 % of area median home prices.”

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What are the Benefits and Risks with an FHA Loan?

August 19th, 2011
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FHA started insuring home loans in 1934.  This government finance agency has helped support millions of first time home buyers over the years. Many people think FHA is only for new home buyers, but FHA offers home refinancing, cash out loans and much more.

The main benefits of FHA mortgages

1) FHA encourages home financing with low down-payments starting at 3.5% of the home sales price.

2) The credit requirements with FHA home loans are more flexible than conventional and private money lenders.

3) FHA refinancing is easy and cost effective if the FHA interest rates should fall at a later date.

FHA also offers a home improvement loans called the FHA 203K. Borrowers can purchase a “fixer-upper” and finance the house rehabilitation.  Since construction loans have disappeared the 203K loan is the only home loan that enables the repairs and renovations to be rolled into the mortgage.

The downside of FHA financing

1) FHA loans usually have more expenses than other conventional home loans because there is mortgage insurance required to be paid upfront prior to closing.

2) Monthly housing expenses are higher than traditional loans because FHA requires a monthly mortgage insurance payment that is due with each loan payment.

3) Each year HUD announces the FHA loan limits. This means that there is maximum amount that can be borrowed and the amounts vary by region.

Read more of Nasdaq’s article online about the basics of FHA loans

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FHA Refinancing Options

June 27th, 2011
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The FHA Home Loan Blog published a great article today highlighting some issues that homeowners should consider when refinancing.

  1. Refinance now because conventional and FHA loan programs now before conforming limits rise at the end of summer.
  2. Some FHA lenders are more aggressive with approving a bad credit refinance for a borrower with compensating factors.
  3. FHA refinance loans is available to homeowners with a minimum credit score of 500.
  4. FHA mortgage products offer multiple mortgage terms such as 3/1, 5/1, 15-year, 30-year.
  5. FHA requires monthly mortgage insurance on FHA loans

Read the original article online at  http://www.fhahomeloanrefinancing.com/blog/refinance-with-fha/

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Maximizing Low FHA Loan Rates

May 13th, 2011
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The Mortgage Bankers Association reported that FHA interest rates fell to their lowest level in 2011. The drop in FHA loan rates creates a new opportunity for homeowners to refinance into a lower and more affordable payment.  The lower FHA rates also help pave the way for first time home buyers to get locked into an amazing FHA loan fixed for 30-years. With home prices falling to their lowest level since 2003, this has become a significant opportunity for people to buy low while financing at record low interest rates.

Loan Professionals Have More Time To Surf Because Less Borrowers Qualify

Former Ditech executive, Jeff Morris told the FHA home loan blog in a recent interview, “FHA mortgage rates” could not be any lower, but not enough borrowers qualify for today’s FHA home loans, because banks and lenders have tightened their guidelines beyond reasonable levels for the average American borrower.” Morris said that we should not hold our breath for a recovery in the housing sector until government lenders are more realistic with requirements for refinancing and home financing. With lenders demanding higher credit scores and more equity, refinancing has truly become a commodity.

Suggested Changes that FHA Should Consider Implementing

  1. Revert back to 2009 Rate for FHA Premiums
  2. Eliminate the FHA Minimum Credit Scores –Qualified borrowers have been benefiting from bad credit refinancing
  3. Keep the FHA loan limits at 2008 levels.
  4. Enable homeowners with underwater mortgages to refinance up to 125%

Read the original article > Current FHA Interest Rates

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Is FHA Mandating Minimum Credit Scores?

March 22nd, 2011
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According to Housing of Urban Development’s 2011 FHA guidelines, loan applicants must have at least a 500 credit score or better to be eligible for a FHA refinance or home purchase loan.  In most cases, applicants with credit scores between 500 and 579 will need to demonstrate strong compensating factors to be approved for most of the FHA loan programs.

  • 85% Max Loan to Value 500 – 579 credit scores with FHA 203(b) for cash out refinancing
  • 96.5% Max Loan to Value 580 + for refinancing with the FHA streamline
  • 90% Max Loan to Value 500 – 579 credit scores

Read the entire article, http://www.fhahomeloanrefinancing.com/blog/fha-credit-score-requirements/

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Best FHA Loan Programs

January 21st, 2011
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FHA loan programs continue to support a majority of the home financing sector this year. With FHA mortgage rates on the rise, it’s a good idea for homeowners to refinance if they have an adjustable rate mortgage while rates are still low.  If you are considering buying a home, now is an opportune time because home prices have fallen and financing is extremely affordable.

New Homebuyer Option- New home buyers only need a 3.5% down-payment to qualify for a government insured mortgage.

FHA Refinancing – You do not need much equity to qualify if you just want to redo your current mortgage. The FHA refinance option enables borrowing up to 96.5%.

Streamline Refinance – If you presently have a FHA mortgage, the FHA streamline refinance is highly regarded because of it’s flexibility.

Cash Refinance - HUD lowered the LTV restrictions from 95% to 85% for borrowers that want to receive money back when in a refinance transaction.

Home Improvement- The 203K loan is similar to a home improvement loan for the rehabilitation of single family homes that meets HUD’s requirements.  Finance to 115%.

Read the original FHA Blog Article > FHA Mortgage Loan Programs

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FHA Loan Articles, Published Loan Articles

January 13th, 2011
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Despite all of the news and hysteria, FHA loan rates are still very affordable.   Today most qualified applicants can get a 4.75% rate that is fixed for thirty years. That means if you are refinancing a in the $400,000 range, the monthly payment would be about $1,900.  The FHA home loan blog posted an article pointing out that  FHA there is no appraisal with FHA streamlines, so people who were being rejected for a mortgage refinance because of equity, now had a solution.  Read the original article online, FHA Refinancing Tips now.

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FHA Promises to Reduce Closing Costs

August 2nd, 2010
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The FHA has promised to lower closing costs in the summer of 2010.  Specifically FHA has discussed lowering the allowable seller concessions. FHA will reduce seller concessions from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA mortgage to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set.  The FHA closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. FHA down payment assistance is not included as a closing cost.

Read the original FHA loan article > FHA Lenders Lowering Closing Costs

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Key FHA Mortgage Loan Facts for Homebuyers

July 22nd, 2010
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BankRate published a helpful article for new homebuyers that outlined important facts about FHA home loans.  In the wake of the housing bubble’s collapse, FHA loans have taken on renewed importance for today’s mortgage borrowers. Simply stated, an FHA mortgage is a home loan insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.  Because of that insurance, lenders can — and do — offer FHA home mortgages at attractive mortgage rates and with less stringent and more flexible qualification requirements.

The FHA doesn’t mandate a minimum credit score, according to Vicki Bott, HUD deputy assistant secretary for single-family housing. Instead, each borrower’s creditworthiness is considered in context.  However, FHA lenders can overlay their own requirements on top of the FHA guidelines. Some lenders might require a minimum credit score. Ask the loan officer about such a requirement if you have bad credit.  “Lenders underwrite FHA home loans to ensure that the customer has the willingness and capability to repay the loan, but we do have flexibility beyond pure credit score to look at the borrower’s financial situation,” Bott says.

The FHA requires a down payment of just 3.5% of the purchase price of the home. That’s a fraction of the %age typically required on most other loans and a “huge attraction,” says Dennis Geist, vice president of government programs at Wells Fargo Home Mortgage in Carlsbad, California.  Borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member, or a grant from a state or local government down payment assistance program.

The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an inducement for the borrower to buy a new home.  FHA mortgage lenders typically charge a higher interest rate on the loan if they agree to pay closing costs. Borrowers can use the good faith estimate of closing costs — commonly known as the GFE — to compare interest rates and closing costs on different loans and figure out which option makes the most sense.

Because the FHA is not a lender, but rather an insurance fund, borrowers need to get their loan through an FHA-approved lender. Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan. That’s another reason Bott says borrowers should shop around.  “We encourage consumers — from a cost, service and underwriting standard — to shop around many lenders or mortgage brokers to make sure they understand what the best fit is for their particular situation,” she says.

Two mortgage insurance premiums are required on all FHA home loans: The upfront premium is 2.25 % of the loan amount, and the annual premium is 0.55% of the loan amount. The upfront premium must be paid when the borrower gets the loan but can be financed as part of the loan amount. The annual premium is paid in chunks of 1/12th of the total along with each month’s mortgage payment.  “The perception is that that sounds expensive,” Geist says. However, he adds, borrowers need to compare the FHA-insured loan to a loan that’s not FHA-insured (and consequently requires a much larger down payment). In many cases, the FHA loan is still the best choice, he says.

The FHA has a special loan product for borrowers who need extra cash to make repairs to their homes. The chief advantage of this type of loan, called a 203k, is that the loan amount is based not on the current appraised value of the home but on the projected value after the repairs are completed. The FHA 203k loan allows the borrower to finance up to $3,500 in nonstructural repairs, such as painting and replacing cabinets or fixtures, Geist says.

FHA insurance isn’t intended to be an easy out for borrowers who feel unhappy about their mortgage payments. But loan servicers can offer some relief to borrowers who have an FHA-insured loan, have suffered a serious financial hardship and are struggling to make their payments. That relief might be a temporary period of forbearance, a loan modification that would lower the interest rate or extend the payback period, or a deferral of part of the loan balance at no interest.

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FHA Streamline Refinancing without Costs

July 22nd, 2010
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The FHA Home Loan Blog recent published an article that uncovered some new opportunities for no cost FHA streamline refinancing. There are approved FHA lenders that are offering no cost mortgage refinance opportunities for a select group of borrowers.  If you have good income and high credit scores above 700, there is a good possibility that you may qualify for a no cost FHA streamline loan in which the lender is paying for the closing costs on their end.  This way you do not have to come out of pocket to cover the closing costs and your mortgage balance would not go up because you are not financing fees that FHA will not allow anymore anyways.  Qualifying for no cost FHA streamline loans will take some shopping online to find a credible FHA loan company that offers these unique refinancing incentives, but clearly it will be worth it financially in the long run.   Read the original FHA article online > No Cost FHA Streamline Refinancing

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Will FHA Loan Products Require a Minimum Credit Score for Refinancing?

July 16th, 2010
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It looks like finally the government is tightening the FHA credit guidelines for home loans and refinancing.  The Federal Housing Administration has always been a great proponent of homeownership and fair lending, but FHA loan defaults are sucking up the FHA reserves. FHA announced they were considering a proposal to no longer approve FHA mortgage loans to borrowers with credit scores below 500.  After Congress left the 2010 FHA loan limits at high levels FHA mortgage companies knew that the mortgage news can’t always be good.  Let’s be honest — For the most part, FHA mortgage refinance programs programs have been pretty aggressive with subprime borrowers.

The results of these FHA lending changes are starting to be realized as the FHA loan portfolio is starting to perform better with less delinquencies and defaults.  Stevens continued, “These are the latest in a series of modifications to allow the FHA to manage its risk better while continuing to support the recovery for the U.S. housing sectors.”  HUD reported that in May, FHA loans that were seriously delinquent rose almost 9%.  That was up from 7.93% at this time in the previous year.  The good news is that FHA loan defaults have declined since January, when they rose to 9.16% which was a record high.  The effects of the foreclosures have been drastic as they have nearly drained the once healthy, FHA reserves.  Congress requires that FHA keep the reserves above a minimum of 2%.

Earlier this year, FHA proposed a measure to implement a minimum Fico score system to the FHA mortgage programs.  Jerry Mlnar of Woodfield Planning, who is a trusted Illinois mortgage company said,  ”FHA has to protect the government home finance program to promote affordable home financing and credit score resquirements for FHA mortgages makes sense.”

The initiative is being considered as a pro-active measure to reduce delinquencies and FHA loan defaults.  Congress considered raising the minimum down-payment requirements to 5% and 10% for borrowers with Fico scores that fell below 580.  For the most part, home buyers are only required to come up with a 3.5% down-payment when financing with FHA home loans.  However FHA direct endorsed underwriters have the discretion to require higher down-payments for candidates that pose a higher risk.

In a recent article, CNNMoney evaluated the FHA lending policies that are being considered in the reform circles of the lending community.  stage. Before going into effect, the department is soliciting public comment on the matters for 30 days. Then, it will evaluate the comments before implementing any changes.

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Government Increasing the FHA Loan Premiums

June 11th, 2010
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The US House passed a bill yesterday that would give HUD the authority to increase the FHA mortgage insurance premiums over a period of time. Keeping the FHA loan premiums low would help increase homeownership and raising the premium would likely decrease new home buyers.  This bill was created in an effort to help the Federal Housing Administration shore up its finances is set for a vote this week in the U.S. House of Representatives.  FHA loan defaults have eroded the reserves for the FHA loan programs, which drives the probable bailout for taxpayers.  The legislation’s goal is to help replenish FHA reserves without harming the agency’s mission of backing low down payment loans for low- and moderate-income borrowers.   The bill would nearly triple the cap on the annual premiums the FHA charges borrowers to 1.50% from 0.55%.  Many government lenders are concerned about the effect high premiums will have on the FHA house financing market.

This bill should make it easier for the FHA to shield itself from losses on loans that were underwritten fraudulently or violated FHA standards.   FHA Commissioner David Stevens said the legislation will make “absolutely certain” the agency has the power to protect itself from bad lenders and rebuild its capital-reserve fund.   The FHA estimates the proposed changes will generate about $300 million a month in positive receipts, allowing the agency to replenish its reserves at a much faster rate than it otherwise would.  This FHA mortgage insurance bill could pose some problems with FHA borrowers who are struggling with affordability on their exiting FHA loan.

In recent months, the FHA has tightened standards for borrowers and expelled more than a thousand lenders from its program.  The FHA raised its upfront borrower premiums to 2.25% from 1.75%, but it intends to lower that premium to around 1% once it has the power to increase the annual premium. The FHA plans to raise the annual premium to 0.90% from the current 0.55%, Stevens has testified.  The FHA estimates the change will result in a premium increase of $42 a month for the typical new borrower.

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Home Buying Opportunities with Declining FHA Loan Rates

May 25th, 2010
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Once again 1st-time home buyers made up almost half of the homes purchased in April.  New home buyers have been inspired by historically low interest rates and low down-payment requirements with FHA loans.  Many mortgage executives privately feared rate hikes once the Federal Reserve allowed $1.25 trillion mortgage-securities purchase program to officially expire, but conforming and FHA loan rates remain at record lows. 

The flexible FHA loan guidelines and aggressive lending standards set forth by the Federal Housing Administration have encourages FHA lenders to finance new home buying if the borrower can document their income.  In 2010, government home financing has taken the market-share for mortgage loans as, through Freddie Mac, Fannie Mae and the FHA, have seized almost 97% of the home financing market.  

According to FHA commissioner David Stevens “This is a mortgage market surviving purely on life support and sustained by the federal government.” Stevens spoke with passion at the Mortgage Bankers Association conference yesterday. He reached out to FHA lenders to start thinking more about the borrower and helping the mortgage industry recover rather than focusing on maxing out loan commissions.  HUD has tightened FHA loan requirements with stricter FHA guidelines that have made qualifying with FHA for challenging for borrower than it was in the past few years.

FHA lenders continue to be blessed with affordable FHA loan rates. The Mortgage Bankers Association mentions that FHA interest rates should remain relatively low in the short term because of concerns in Europe financial woes with debt burdens. Lower FHA rates help to reinforce demand. Despite average thirty-year FHA interest rates dipping below the 5% illustrious threshold, the MBA noted last week that the number of people seeking purchase loan applications has declined by over 27%, the most dramatic drop since May of 1997.   Read the original FHA loan article online at CNN Money >

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FHA Loans for First Time Home Buyers

April 13th, 2010
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FHA offers first time home buyers a low down-payment mortgage that only require a 3.5% down payment.  According to 2010 FHA guidelines, borrowers can finance a home up to 97.5% loan to value.  I/f you want to buy a home without coming out of pocket for lender fees, FHA guidelines allow lender paid closing costs.  FHA lenders can pay for borrower closing costs but the FHA rates will be slightly higher as the closing costs are factored in.  In addition, FHA also allows gift money for FHA home loan transactions. This means that borrowers can utilize money from friends or family as the source of the down-payment.  Read the original article, FHA Ensures Affordable Financing for First Time Home Buyers on the FHA Home Loan Blog.

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FHA Lenders Face Tougher FHA Loan Requirements

April 13th, 2010

In an effort to minimize lending risks, the government wants to toughen standards for lenders who offer FHA home loans. At first this may not seem like much of a concern for borrowers, but in fact if you need a loan you may well be impacted.  In a recent article, FHA Commission David H. Stevens explained how the federal government is moving towards requiring more capital to be a FHA-approved lender. “Since 1993,” says Stevens, the “FHA has required approved lenders to have a net worth of at least $250,000. To ensure that FHA mortgage lenders are sufficiently capitalized to meet potential need, effective immediately, all new lender applicants for FHA loan programs must now possess a minimum net worth of $1 million.” There will be an exception for current FHA-approved small business lenders, they’ll need a minimum net worth of $500,000.

This means that FHA lenders will pay a price if they don’t make FHA loans that don’t perform well.  It also means that FHA brokers will pay a high price for making mistakes on the loan documents. Under the new FHA guidelines, HUD can force lenders to buy back government mortgages which are not properly underwritten. If you are a small lender and the FHA wants you to buy back a few loans at $250,000, you might be out of business.

FHA Lenders in such situations face some difficult choices. If they don’t buy back the loans they’re out of the FHA loan program and that greatly limits their ability to compete for borrowers. Alternatively, smaller firms with that $250,000 in capital may not have the cash to buy back the mortgages, meaning they’re out of business.  HUD is forcing lenders to take on more risk if they are serious about originating FHA loans. Stevens says “approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million.”  These FHA loan requirements signal that the FHA is intent on decreasing the loan default ratios and that they plan to be around for the next decade.  Read the original FHA article >

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Is FHA Losing Market Share for Home Loans?

March 18th, 2010
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In a recent article the FHA Mortgage Guide reported the statistics for February FHA loan originations.  HUD released these figures and the early results indicate that this new FHA loan program looks like a hit.  This FHA loan product is on its way to insure over two million FHA mortgages in 2010. Those figures sound robust but it’s still down 29.5% from the previous year.

Many industry insiders believe that FHA will lose some of their market share because of new FHA requirements and tighter FHA guidelines. FHA mortgage rates remain ridiculously low, but most first time home buyers are having a difficult time qualifying for a FHA home loan.  Time will tell if American consumers will continue to use FHA mortgage loans for refinancing.  Rising mortgage insurance premiums and their higher credit score requirements certainly are not helping matters.

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