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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FHA Credit, Published Loan Articles

2011 New Rules for FHA Requirements

March 14th, 2011

FHA rates remain below 5% on 30-year mortgages, but the FHA guidelines may continue to be tightened, thus preventing thousands of borrowers of successfully refinancing. One of the greatest downsides for FHA lenders in regards to new FHA loan requirements is that it is now more difficult to get licensed for FHA lending in multiple states.  The bottom line is that more members are likely to be attracted to the idea of getting an FHA loan and the available funds of approved lenders must be sufficient to provide borrowers with what they need to get into the home of their dreams.  Read the original article online > New FHA Rules for Lenders

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FHA Guidelines

FHA Short Refinance and Emergency Mortgage Relief Program at Risk

March 4th, 2011
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House Republicans introduced legislation yesterday that aims to put an end to several government initiatives like the FHA short refinance and the Home Affordable Modification Program.  Yesterday they voted to abolish the FHA Short Refi program and the $1 billion Emergency Mortgage Relief Program.

Compare Rates on a FHA Refinance Mortgage

Next week they will look to dismantle the $29 billion Home Affordable Modification Program and the $7 billion Neighborhood Stabilization Program.  Conservative lawmakers made it clear that the Obama refinance programs have failed and now it’s time to shut them down. The argument is that none of these programs are working and that they are a waste of taxpayer dollars.

Will the  Emergency Mortgage Relief Program Be Shut Down?

FHA Commissioner David Stevens continues to support the FHA Short Refinance, which targets underwater, but still current loans; he told a House subcommittee Wednesday that 23 approved FHA lenders are signed up to participate. FHA mortgage rates continue to fall, but not enough borrowers meet the refinance requirements. The bottom line is that millions of homeowners continue to struggle with their homes being worth less than their mortgage.  Lenders will not extend underwater mortgage options unless they are backed by one of these government initiatives. This program requires FHA lenders to write down at least 10% of the principal balance mortgage balance. The problem with the FHA short refi is that none of the mortgage giants want to participate in the loan relief program. Fannie Mae and Freddie Mac do not want to write down principal on loans that are currently performing. To this date only 44 FHA loans have been endorsed for the short refinance program.

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FHA Loan Articles, FHA News

10 Myths about FHA Loans

February 28th, 2011
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There is a lot of false information going around about FHA loans, so we wanted to dispel some of the myths about the FHA loan program.

FHA lending has become an extremely popular choice for financing so it is important that you have the full understanding of FHA mortgages and the power of this government finance option. Today’s FHA rates fell to record levels recently and most mortgage companies have started to offer home loans insured by the FHA as they are truly one of the best government initiatives in our country’s history.

 

FHA Mortgage Loans Have developed a strong reputation over the last 77 years.

Below we listed 10 common myths about FHA loans.

  1.  You do not have to have a government job to qualify for a FHA loan.
  2.  FHA does not stand for Fair Housing Association.
  3.  FHA mortgages are not just for first time home buyers.
  4.  Mortgage insurance is not required with FHA loans on 15–yr terms below 90% LTV.
  5.  FHA does not have a minimum credit score requirement, but many FHA lenders incorporate additional credit score guidelines.
  6.  No cash out is allowed on the FHA Streamline.
  7.  The Max CLTV on a FHA loan is 125%.
  8.  FHA does not allow cash out refinancing to 95%.
  9.  FHA does offer home rehabilitation loans to 115%
  10.  FHA will not approve a loan to borrowers who defaulted on federal government loans

With foreclosure rates and loan defaults rising, you can expect FHA to continue modifying the FHA mortgage products on a regular basis, so check back our blog and stay up to speed.

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FHA Lending, FHA Loan Articles

What is an FHA Loan?

February 28th, 2011
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Over the last 5 years, FHA financing programs have been the hottest mortgage product on the market, but many consumers do not really know what a FHA loan consists of.  The Federal Housing Administration was created in 1934, although its purpose has changed somewhat since it was originally put together. Originally, the administration was created to help reduce unemployment and increase home construction. Today, the FHA serves primarily to help those who cannot normally afford housing to purchase homes. FHA loan programs are for borrowers who want to refinance or purchase a home.

How to Qualify for a FHA Loan

Here, we’ll go over just what is an FHA loan, as well as how you can take advantage of these services if you want to own a home but cannot normally afford one. FHA loans are essentially mortgages that work as a kind of federal assistance, and are designed to help Americans with lower incomes borrow money for purchasing homes. The proper term for the loan is an FHA insured loan, because the Federal Housing Administration does not actually give out the loan itself. Instead, FHA lenders have the client pay a mortgage insurance premium, or MIP, that equals a percentage of the amount of the loan at closing. This is typically financed by the lender and paid to the FHA on behalf of the borrower. Today there are private mortgage insurance companies, which work with the FHA to help those that are not able to afford a conventional down payment or who do not otherwise qualify for PMI programs.

An FHA mortgage loan can be a valuable tool for those that want to buy a home, but who do not have the starting capital to be able to place a down payment. FHA loans can only originate from government approved lenders. However, they come in a variety of forms so keep in mind the fact that different lenders have different interest rates, terms and conditions, and other factors is important. Shopping around and comparing the various aspects of loans from different lenders is the best way to ensure you don’t pay more than you need to.

FHA loans can be adjusted based on your needs. Options such as the hybrid adjustable rate, which allows borrowers to finance their mortgages, and down payment grants are a good way to make the loan work better for you. Borrowers can also take advantage of section 251, which insures home purchases and refinanced loans to allow interest rates to be lowered over time. There are a number of ways in which you can make an FHA mortgage meet your specific needs, allowing you to get the house you’ve always wanted at a price you can afford to pay over the correct amount of time.

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FHA Lending, FHA Loan Articles

FHA Guidelines for Home Refinancing

February 24th, 2011
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In a recent article, the FHA Home Refinancing blog considered the implications of the 2011 FHA guidelines for refinancing.  The blog post points out that FHA refinancing can help borrowers get access to funds for home remodeling or simply to lower your monthly payment if the FHA mortgage rates fall to a level creating an opportunity to save.  “Refinancing is a valuable tool to have at your disposal as a homeowner, and whether you have private mortgage insurance or an FHA insured mortgage, there are steps you can take to improve upon your mortgage.”  Read the entire article on FHA Refinance Guidelines.

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FHA Guidelines

FHA Loans for Borrowers with Less Than Perfect Credit

February 7th, 2011

Nationwide lenders announced a FHA loan program that may open the door for loan applicants that have been rejected for mortgage refinancing or home buying because of their low fico scores.  Borrowers with credit scores between 500-640 FICO may still be eligible for home mortgage purchase loans and FHA refinancing.  In a recent article, Bloomberg indicated that there are 6.3 million borrowers in the 620-640 FICO range alone.  Save money with reduced monthly payments that are a reality with a FHA mortgage loan.  Read the complete Nationwide post online, Second Chance Loans with FHA.

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FHA Credit, FHA Loan Articles

HUD Continues FHA Financing for Flipped Homes

February 1st, 2011
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A recent Reuters article revealed that our government has granted an extension for a FHA mortgage program that offers a unique home financing niche for flipping houses.  Most mortgage lenders and bankers’ business is contingent on FHA refinancing and home buying programs.  FHA loan products are probably best known for helping first time homebuyers become homeowners.  You only need a 3.5% down-payment for FHA financing and with the streamline loan you don’t need any equity because there is no appraisal required.

In the past FHA guidelines had gone to great lengths to prevent the use of a FHA mortgage by borrowers who were simply flipping houses for quick profits.  Many people have profited significantly through process of flipping homes.  According to Peter Miller, the “flippers extract an artificially higher value through such steps as appraisal fraud, underwriting fraud, mortgage fraud, property tax evasion, etc.”  Miller said that by “refusing to approve FHA home loans for quick re-sales HUD was striking directly at illegal flippers because such individuals want to have the fastest possible sales to maximize profits.”

On Friday, HUD extended the FHA home financing program that enables buyers of flipped homes to obtain home mortgage loans backed by the Federal Housing Administration. The FHA in 2003 banned buyers from obtaining government-backed mortgage insurance on homes they bought less than 90 days after a previous sale.

Last year, FHA lifted the FHA financing ban temporarily in an effort to help investors sell foreclosed homes. The goal was to help stimulate the depressed housing market. The FHA Commissioner, David Stevens said, “This action enables our borrowers, especially first-time buyers, to take advantage of this opportunity and buy a home that has recently been rehabilitated. Stevens continued, “It will also help to move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout this country.”

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FHA Guidelines, FHA News

New FHA Power Saver Loan Program

January 26th, 2011

HUD recently proposed Power Saver loans to fund home improvement measures on FHA’s list of “eligible measures” with no energy audit or rating.

The new FHA loan is a pilot program created to help homeowners finance energy efficient home improvements. HUD said that FHA will insure these home improvement loans and many FHA lenders are excited about the prospects of helping the environment.

The PowerSaver pilot could help test and demonstrate an important concept that could lead to better, more precise underwriting for FHA insured loans and in the broader mortgage market. To accomplish this, the loans made in the pilot and the information collected must match the credit policy questions presented.  A home energy rating will provide the needed information, we believe that the entire mortgage industry, especially the federal mortgage programs, could learn from the results Read more FHA articles, > Power Saver Loan Program  & HUD’s New Energy Efficient Initiatives.

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Energy Efficient Financing, FHA Loan Updates

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

FHA 203K Loan for Home Improvements

January 14th, 2011

FHA continues to offer rehabilitation solutions for home improvement financing with the 203K loan.  This FHA loan program is unique and not that many FHA lenders offer the full array of this type of home financing.

The FHA 203K home loan is considered a streamlined rehabilitation home loan and mortgage insurance implications are applicable.  The 203K loan is different than your traditional home improvement loan that needs equity for eligibility, because it enables financing to 115%.  FHA loan rates may var, so check with your loan officer for current pricing.

If you have a borrower who is interested check their eligibility and refer to the FHA 203k guidelines from HUD.

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FHA Loan Articles, Home Rehabilitation

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 Credit, FHA News, Published Loan Articles, Uncategorized

2011 FHA Limits

January 11th, 2011
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Many mortgage professionals feared that Congress would reduce 2011 FHA loan limits in an effort to further tighten lending and mitigate fraud that has devastated the United States housing sector and economy in general.  If congress decreased FHA limits than many borrowers would be unable to refinance because their existing mortgage would exceed the 2011 FHA loan limits.  Fortunately, Congress approved a temporary extension for the current FHA loan limits and that offers a least a glimpse of hope for homeowners struggling to get approved for FHA loan refinancing that would lower their monthly payment.

Many FHA lenders have feared privately that Congress may allow the conforming and FHA limits to fall when the bill setting mortgage limits expires September, 2011. Tightening FHA guidelines sounds great and looks good on paper, but the reality is that too much tightening can completely strangle the housing market and the cash flow most Americans have become accustomed too.

Let’s be honest and look at the reality of the mortgage industry.  Millions of Americans own homes and if they can document that they can afford a refinance loan for a home that they already have, then the FHA lender should approve the loan and move on.  If a borrower can document to a FHA lender that reducing their interest rate to a competitive level of today’s current FHA rates will increase the likelihood of them paying their mortgage on time, then the lender should approve the mortgage refinance and move on — Isn’t that what a loan modification is any way.

The U.S. government took tax payer dollars and distributed it to the banks so that they would lend more money to homeowners and small business.  Unfortunately the banks did not oversee and mandate the increased FHA lending and liquidity. The fact remains that FHA credit guidelines have tightened significantly in the last 12 months.  The FHA streamline continues to have a few loop holes that are in fact helping FHA borrowers refinance, but you must already have a FHA loan to qualify for the streamline refinance program.

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FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles

3 Secrets of FHA Streamlines Revelead

December 21st, 2010
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The FHA streamline loan has become one of the most sought after mortgage refinancing options in the country in 2010.  We outlined the most important factors that you need to know about FHA streamlines.

1. What does a borrower need to qualify for a FHA streamline refinance?

The first key component is that borrowers must presently have a FHA loan.

• Borrowers must have made at least 6 months’ worth of FHA mortgage payments.

• No mortgage payments can have been reported as “late” or delinquent” on the loan over the last year.

2.  Is there a home appraisal needed for qualification purposes?

In most cases, there is no formal appraisal required for FHA streamlines. This helps many underwater borrowers refinance in a pinch. Some borrowers who have no equity issues may want to do an appraisal because it enables them to finance their closing costs.  Last year, HUD changed the FHA guidelines to no longer allow borrowers to finance lender closing costs on the standard FHA streamlines.  No cost FHA loans are available to qualified borrowers, so discuss your eligibility for no cost refinancing.  This means that if your lender charges for processing, underwriting, title, escrow and loan origination that you will have to pay for these streamline refinance closing costs unless you qualify for a no cost FHA streamline.

3. Does a FHA streamline require income documentation?

In most cases with a FHA streamline refinance if the borrower is a salaried employee, the underwriter will not ask for income documentation like paystubs or W2’s.  However they will verify with your employer that you are still currently working with the company in the position that you stated on your residential loan application.

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FHA News, FHA Streamline

HUD Clarifies Indemnification Policy for FHA Lenders

October 19th, 2010
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HUD finally clarified its indemnification policies to give its largest FHA lenders a better understanding of when they might be on the hook for home mortgages losses.  The Department of Housing and Urban Development generally requires lenders to reimburse the FHA for losses on defaulted loans when the agency can prove poor underwriting or fraud.  Housing commissioner David Stevens said he wants to provide clearer guidance for FHA mortgage loan companies  with “delegated lender insurance authority” by establishing new standards for “serious and material violations” that trigger indemnification.

FHA Rates Fell Below to a New Low on 30-Year Fixed Rate Terms!

FHA lenders with lender insurance authority can self-insure FHA loans. They account for roughly 70% of FHA home loan originations and amass loans through correspondent purchases from mortgage bankers.  In drafting the new policy, HUD did not change its “incontestability clause,” which exempts servicers from liability for errors made by the originator.

FHA consultant Brian Chappelle of Potomac Partners called this development “good news” for the industry. “Unlike Fannie Mae and Freddie Mac, the FHA will not hold the servicer accountable for origination errors.”

If the servicer were accountable, “it would have stopped FHA mortgage lending in its tracks,” Chappelle said.  HUD has issued the new indemnification policies as a proposed rule. The comment period ends December 7th. “We need to clarify which circumstances we’ll require indemnification and the level of loan performance we expect lenders to maintain,” Stevens said.

Under the proposal, HUD will seek indemnification for “serious and material violations” of FHA origination requirements in cases where the loan never should have been endorsed by the lender or insured by the FHA.

The proposal requires lenders to analyze the borrower’s creditworthiness, and verify sources of income, assets and down-payment. Funders must also comply with FHA’s appraisal requirements, and address problems with the condition of the property.  “It is a reasonable standard,” Chappelle said.  If the FHA lender fails to verify the borrower’s income, HUD might seek indemnifications irrespective of the whether the violation caused the mortgage to default.

The proposed rule also sets a benchmark for lender performance in terms of default and claim rates.  FHA lenders in the lender insurance program must maintain a claim and default rate that is at, or below, 150% of the national average. The national average for FHA claims and defaults on mortgages 24 months old was 3.66% at June 30.

The proposed rule is aimed specifically at lenders, which make up only 29% of all FHA-approved lenders.  HUD claims it does not have explicit authority to require indemnification for bad loans from other FHA-approved lenders.  “The FHA is asking that Congress grant explicit authority to require indemnification for loans that were improperly originated for the remaining 71% of approved FHA lenders,” Stevens recently told the Senate Banking Committee.  The commissioner said the Obama administration supports an FHA reform bill, sponsored by Democratic Sens. Mark Begich, Sherrod Brown and Michael Bennet that extends FHA indemnification powers over all approved lenders.  It is unclear when Congress will act on this legislation.  The article was written by Brian Collins.

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FHA Guidelines, FHA News

Is FHA Eliminating Adjustable Rate Loans?

October 4th, 2010
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Today you can find FHA mortgage rates as low as 3.625% on the 5/1 ARM program.  This is a popular loan because it offers an amazing fixed rate for 5 years.  After the fifth year it becomes an adjustable interest rate unless the borrower refinances or sells their home.  FHA Loan Pros recently reported that the several banks offering government loan products were about to drop the FHA ARM option.  According to Lead Planet economist, Kevin Grant, “There are certainly are rumors in the mortgage circles that HUD will eliminate their FHA ARM products in 2011.”  Grant continues, “As a company that sells mortgage leads to banks and lenders we get a lot of feedback from lending companies and most FHA lenders do not want to get burned when the interest rate converts to a variable rate term, especially since 30-year fixed rate mortgages are published at 4.375%.”.FHA Loan Pros came right out and asked last week, “Why would anyone want an ARM in today’s market?”

A few days ago, Freddie Mac reported that you could get a 30-year fixed-rate mortgage at 4.37%. At the same time, the 5-year Treasury-indexed ARM had a start rate of 3.54% while the 1-year Treasury ARM began at 3.40%.   Yes FHA rates below 4% are appealing but the 15 or 30-year term offers so much more security. Recent published reports indicated that in 2010 ARMs equal just 2.7% of all FHA loan originations. On the flipside, for new homebuyers in high cost regions the difference between the 5/1 ARM and the 30-year fixed rate is several hundred dollars a month.  Besides there are borrowers that are quite sure they will be in their home for less than 5 years, so why not extend them this option.

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FHA Loan Articles, FHA News

FHA Loan Talk

September 29th, 2010
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According to FHA Loan Pros, credit scores on FHA home loans are now averaging a respectable 695, that’s up from 662 a year ago. The finance publisher notes that with the challenges of the economy and the tighter lending guidelines that it would be difficult to imagine many consumers getting approved FHA mortgage loans with fico scores below 600 in today’s world.

But such a process reflects how mortgages used to be made, something archaic in the new world of automated credit scores and secondary markets where loans are instantly bought and sold. As well, the old system could easily be discriminatory and often was.  The combination of a low credit score and a 10% down payment is unlikely but in the past these types of bad credit borrowers were able to finance using the FHA loan programs.

HUD is seeking to re-shape the mortgage market by requiring borrowers to demonstrate more financial responsibility and credit capacity. That’s a reasonable standard, especially given the loose guidelines outside the FHA loan programs which led to a significant rise in foreclosures and economic distress during the past few years.  FHA rates remain at record low levels, so the likelihood of FHA refinance and purchase activity continuing to rise.

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FHA Guidelines, FHA Loan Articles

FHA Loan Changes on the Horizon

September 14th, 2010
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It’s no secret that FHA loan requirements are increasing and FHA guidelines have been tightening.  The streamline refinance may be the last aggressive program left because there is no appraisal and no income documentation required.  All indication point towards high credit scores and more significant down-payment requirements for FHA home financing. Even with interest rates so low, these programs are becoming increasingly difficult to get processed. check the most recent loan amount criteria for government insured loans and see FHA loan limits for 2014.

  • Eliminating the “yield spread premium” paid by FHA mortgage lenders to mortgage brokers: If adopted, this would prevent mortgage lenders from paying premiums to mortgage brokers who originate high cost mortgage loans.
  • Increasing oversight over approved FHA lenders: CRL recommends intensifying scrutiny of FHA mortgage lenders to prevent excessive lending fees, and is requesting additional preventive measures for reducing the number of higher cost FHA mortgages falling through the cracks.
  • Ensuring that FHA borrowers are not victimized by “junk fees” and excessive charges: The CRL asserts that the recent foreclosure crisis was caused by “predatory lending practices and toxic financial products and not by any policy goal aimed at increasing home ownership.”  Unfortunately, if FHA wants to keep its home lending self-sustaining, raising mortgage insurance premiums either paid at closing or as part of monthly mortgage payments appear necessary.
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FHA Guidelines, FHA Loan Updates, Mortgage News

HUD Launching FHA Refinancing for Underwater Mortgages

August 26th, 2010
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The Federal Housing Administration will launch a program on September 7th that will allow underwater homeowners who are current on a non-FHA loan to refinance into an FHA-backed loan when their lender agrees to write off at least 10 percent of their principal.  The FHA Short Refinance program, originally announced in March, is designed to help homeowners in markets that have seen large declines in home values refinance into “a safer, more secure” mortgage, FHA Commissioner David Stevens said in a statement

HUD recently announced changes to the FHA mortgage loan program to assist homeowners with mortgage loans that exceed the value of their home. The changes are part of broader efforts to assist homeowners that were announced by the Obama Administration.  Previously, Obama’s mortgage relief team had announced that by the Fall, they planned to revise FHA guidelines with additional changes to the FHA loan programs.  Their goal is to offer a FHA refinance loan option for borrowers who have made their loan payments on time but owe more than their home is worth.

In Mortgage Letter 2010-23 HUD sets forth the details regarding the FHA short refinance alternative. The option will be available for loans with case numbers issued on or after September 7, 2010 and closed on or before December 31, 2012. However, HUD advises that the loss coverage that will be part of the refinance option will use funds under the Emergency Economic Stabilization Act of 2008 (EESA), and that if availability of the loss coverage is delayed beyond September 7, 2010 the implementation of the loss coverage also will be delayed. Supplemental Directive 10-08, issued under the Making Home Affordable (MHA) Program in conjunction with Mortgagee Letter 2010-23, provides additional guidance for investors and servicers. The Supplemental Directive notes that the FHA refinancing is not yet effective and a subsequent Supplemental Directive will be issued when the program is operational and servicers can executed a Commitment to Purchase Financial Instrument and Servicer Participation Agreement (SPA) or a Service Schedule to the SPA, as applicable, with the U.S. Department of Treasury.

FHA Short Refinance Eligibility- The refinance option is available for homeowners with a non-FHA mortgage only if the following conditions are satisfied:

  • The homeowner must be in a negative equity position. (mortgage balance must be greater than the property value)
  • Borrower must be current on their current home mortgage loan.
  • The homeowner must occupies the home as their primary residence and the home consists of one to four units.
  • Borrower must qualify under standard FHA underwriting requirements and have a “FICO based” decision credit score of at least 500.
  • The existing first lien mortgage loan holder must write off at least 10% of the unpaid principal balance.
  • The FHA refinance loan may have a maximum loan-to-value ratio (LTV) of 97.75%.
  • Second mortgage loans that are not extinguished must be re-subordinated and the combined LTV (CLTV) with the FHA refinance loan may not exceed 115% LTV.
  • For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) or that are manually underwritten, the homeowner’s total monthly mortgage payment for the FHA refinance loan and any subordinate mortgage loans may not exceed 31 percent of the homeowner’s gross monthly income, and the total monthly debt payments of the homeowner may not exceed 50% of such income.
  • Premium pricing may not be used to pay off existing debt obligations to qualify the homeowner for the FHA mortgage.
  • The mortgagee may not make mortgage loan payments on behalf of the homeowner or otherwise bring the existing loan current to make the homeowner eligible for the refinance option.
  • The existing home  loan holder may not have brought the existing loan current, other than through an acceptable permanent loan modification.
  • For a homeowner with a loan that was permanently modified under the Making Home Affordable Program (HAMP), the FHA refinance loan may not close before the month that follows the month in which the modification became permanent. For a homeowner with a non-HAMP permanent modification, the homeowner must make at least three monthly payments on time and the modified loan must be current for the month due. If a homeowner is in a temporary or trial modification period, the homeowner is not eligible for an FHA refinance loan under the program.
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Annual Loan Fees Are Raised for FHA Home Loans

August 6th, 2010
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After considering increasing the FHA loan costs, the Federal Housing Administration decided to turn the talk into increased revenues.  The FHA came together in agreement today that starting September 7th to raise the annual fees for FHA loans insured by the agency in an effort to strengthen its cash-strapped balance sheet.  Earlier this week, the Senate extended their approval for a bill that enables the FHA to raise their annual fees that borrowers who have an FHA mortgage pay by nearly 300%. However, a spokesman for the FHA said that their initial plans will begin with modest increases of the loan fees at first. President Barack Obama is expected to sign the FHA bill later this month.  HUD announced earlier today that they have a new FHA refinance loan called the FHA short refinance and this program was created to extend loan relief to distressed borrowers.

Will the Icreased Annual FHA Fees Reduce Homeownership?

The new law would grant FHA the authority to increase annual mortgage insurance premiums paid by the borrower over the life of FHA home loans capping out at a maximum of 1.5 %.  Presently, the annual mortgage insurance is limited to 0.55%.  However, FHA Commissioner David Stevens indicated that the mortgage premium would be raised gradually, first to 0.85 % or 0.9 %, depending on the size of the borrower’s down payment. The new FHA loan costs are expected to increase about $3.6 billion annually for the FHA.

The good news for new homebuyers is that FHA promised to reduce the upfront mortgage insurance premium from the current 2.25% to about 1% and the agency hopes that this helps offset the increased cost of the annual premium for FHA borrowers. The upfront premium is paid prior to the FHA loan closing.  Stevens has said it makes more sense for the fees to be paid throughout the life of the loan in the annual premium instead of forcing borrowers to pay them when the loan is made.  New borrowers would pay an average of just under $40 per month more under the new fee structure.  The minimum down-payments for FHA loans remain at 3.5% for most homebuyers. Lawmakers struck down a Republican proposal to raise them to 5%.

The FHA has capital reserves equal to just 0.53% of the value of the thousands of outstanding mortgage loans that they insure.  Many mortgage executives have been troubled by this because it is well below the 2.0% required by law, according to an independent actuarial study released late last year. A new study is expected to be released this fall.  In addition to raising the FHA annual fees, the House has also passed another finance bill that was created in an effort to strengthen the FHA’s enforcement capabilities.

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