FHA Loan Guide

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

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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

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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.

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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.

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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

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