I great article I found online- just thought I would share.
Posts Tagged ‘fha’
Tax Tips for 2008- How to Come Out a Winner!
Friday, December 12th, 2008What the FHA Needs To Get the Job Done
Friday, October 3rd, 2008In the current credit squeeze, if you have less than a 20 percent down payment, there’s pretty much only one major source of mortgage financing available: the Federal Housing Administration, the Depression-era home loan insurance agency that still offers 3 percent down, 30-year, fixed-rate mortgages with consumer-friendly credit standards, even on jumbo loans in high-cost areas of California and the East Coast.
But there is a potentially troublesome problem looming for the FHA: New loan volume is exploding — tripling in the past 12 months alone — and Congress has handed the agency the responsibility for almost all the government’s efforts to keep economically distressed homeowners out of foreclosure by refinancing their unaffordable loans.
The FHA says it needs to hire more staff and upgrade its technology to be able to handle the crush of new business, but it complains that Congress hasn’t appropriated the necessary funds — $65 million — to do the job fast enough. Capitol Hill appropriations committee staff dispute some of that, but the specifics of the arguments over dollar amounts aren’t the issue.
The real question is this: Can a government agency whose market share dropped below 3 percent during the heyday of the subprime boom now properly handle explosive volume rocketing it to an estimated market share of 30 percent this year? Are both the agency and Congress — which controls the purse strings — up to the task?
Mortgage industry, home building and real estate experts worry about the possible consequences of shifting too heavy a share of the mortgage market too quickly to an agency that may be inadequately staffed or funded. Howard Glaser, who served during the Clinton administration as acting general counsel for HUD, the parent department for the FHA, worries that loading on too much business without properly funding staff and technology upgrades raises the odds of breakdowns.
“FHA is assuming the risks of a mortgage market abandoned by private investors — without the risk management tools,” he said. “My fear is that next year at this time, we will be debating an FHA bailout.”
Steve O’Connor, senior vice president of the Mortgage Bankers Association, agreed there’s danger lurking in the massive increases in business going to the FHA. “You just can’t expect to fit that amount down the same size pipe — you’ve got to expand the size of the pipe” by funding additional staff and technology, he said. “It’s a very serious concern.”
Other industry groups, including the National Association of Home Builders and the National Association of Realtors voice similar worries. Dick Gaylord, president of the Realtors, said “if [the FHA] is truly going to serve its growing constituency,” it will need more money and people.
The FHA — for years the forgotten federally controlled stepchild of an industry dominated by Fannie Mae, Freddie Mac and the Wall Street mortgage bond machines — is now insuring more than 140,000 new loans a month, according to agency statistics. It has $400 billion in outstanding loans in its insurance portfolio and runs its home mortgage business with 937 employees in offices spread around the country. The agency wants authorization to add 160 employees immediately.
Though historically a resource for first-time buyers, minorities and people with imperfect credit, the FHA increasingly is the go-to place for people who have above-average credit backgrounds but lack — or choose not to use — large amounts of down-payment cash. In August, according to agency data, approximately 23 percent of new FHA home purchasers had FICO credit scores above 720 — far beyond the proportion of prior years. In the same month, just 12 percent had FICO scores below 600.
With mortgage limits extending into the jumbo category, the agency is attracting large numbers of customers from high-cost areas of the country, especially California and the mid-Atlantic states. One of 10 new borrowers in August was from California.
To some mortgage lenders and loan officers, the FHA is now the main game in town. “Nothing competes with them,” said Paul Skeens, chief executive of Colonial Mortgage Group in Waldorf.
Fannie Mae and Freddie Mac, both now in federal conservatorship, have steadily added fees to the point where “they just aren’t competing with FHA on down payments or costs,” Skeens said. In 2001 and 2002, Skeens’ firm did just one-quarter of 1 percent of its volume in the FHA. Now it’s 60 percent.
“The last thing we need right now, with the shape the housing market is in,” he said, “is for FHA not to function well.”
By Kenneth R. Harney
Turning Point: Senate Passes $700B Rescue Bill
Thursday, October 2nd, 2008After the Bush Administration’s $700 billion financial rescue proposal went down in flames during a House vote on Sept. 29, a slightly revamped version has risen from the ashes and went to the Senate Floor for an evening vote on Oct. 1.
The measure passed easily, with 74 in favor and 25 against.
Key among the changes is an amendment that would lift the cap on FDIC-insured bank deposits from $100,000 to $250,000. The limit would revert to $100,000 at the end of 2009 unless extended by Congress.
Other amendments include a tax relief package that would provide business tax breaks for the use of renewable fuels such as wind and solar power; shield approximately 26 million Americans from the alternative minimum tax (AMT); grant tax relief to victims of natural disasters; and grant a series of extensions for various state and local tax programs.
Versions of the tax relief package have previously been approved by both the House and Senate, and some have speculated that attaching it to the rescue plan will sweeten the bitter pill the House may have to swallow when the bill comes back around for a second vote.
“Adding tax relief that creates jobs, supports families and secures a new energy future for the country make this bill a lot fairer and a lot better for hardworking, taxpaying Americans,” said Sen. Max Baucus, chairman of the Senate Finance Committee.
In a press briefing Wednesday, White House Spokesman Tony Fratto suggested that sentiment on the Hill regarding the bill might have changed in recent days as the failure of the House vote brought into sharp relief the ways in which the credit squeeze is affecting everyday Americans.
Fratto indicated that members of Congress are “starting to hear other public officials and business groups to express more clearly just the strains that they are dealing with in this current environment and the urgency for addressing it.”
Indeed, 50 business trade groups wrote a joint letter to Congress urging them to pass the bill in order to “to prevent a meltdown” of the country’s capital markets.
Remarking on the partisanship that divided the House earlier this week, Fratto added, “I don’t think it’s a conservative thing or a liberal thing. We’re talking about the U.S. economy. This isn’t about free markets or socialism. This is a debate about frozen markets. And you can’t have a free market when you have a frozen market.”
Going into the vote, Senate Majority Leader Harry Reid indicated that the legislation had broad support from Senators on both sides of aisle and suggested that with the improvements made to the Administration’s proposal, the Senate would pass the legislation and the House of Representatives would follow suit soon after.
“I believe that this legislative package will ensure that the needs of Main Street are not forgotten,” Reid said.
Speaking from the Floor, Senate Republican Leader Mitch McConnell said that after “extensive consultation,” he and Reid “believe that we have crafted a way to go forward and to get us back on track. This is the only way to get the right kind of solution for the American people.”
McConnell acknowledged that “no one is happy with the situation that we’re in, but it’s a situation that we have. And the American people didn’t send us here just to do easy things. They expect us to rise to big challenges and to put aside differences and to work on their behalf.”
Noting that the “tendency to be the most partisan” is heightened during the period right before an election, McConnell said, “We’re in the process of setting that aside, rising to the challenge, both Democrats and Republicans, and doing what’s right for the American people.”
Speaking of the election, Sens. Barack Obama, John McCain and Joe Biden all flew back to Washington, D.C. from the presidential campaign trail to cast their votes in favor of the bailout package.
Following the vote, Senators were hopeful that revised bill could now be passed successfully in the House when it hits the Floor again on Friday.
“This vote tonight, I think, was the turning point,” Baucus said.
Broker Newswire
Issue Date: Mortgage Law Central – October 13, 2008
HUD’s NEW Proposed Refinance Program
Thursday, October 2nd, 2008WASHINGTON — The Department of Housing and Urban Development launched a program Wednesday to help underwater borrowers refinance their mortgages, but its details appeared to pose fresh challenges for servicers and lenders.
The agency said borrowers with payment- and debt-to-income ratios over a certain threshold must complete a three-month trial period in a new loan before the Federal Housing Administration would insure it. Some analysts said that stipulation could cause problems.
“Some folks thought the credit ratios would have been a little more liberal, particularly in light of the Federal Deposit Insurance Corp.’s experience with the IndyMac portfolio,” said Brian Chappelle, a partner at Potomac Partners LLC and former HUD official.
The Hope for Homeowners program allows borrowers to take out FHA-insured mortgages, relieving the owners of the old mortgage of a delinquent loan in exchange for writing its value down to 90% of the current home value and waiving any prepayment or late payment fees. The FHA in turn will pay off the old loan and give second lien holders a share in the possible future appreciation of the home’s value.
Though the program was created by a bill passed in July, it left most of the details to HUD and an oversight board of federal regulators.
Under those details, which were released Wednesday, the borrower’s payment-to-income ratio cannot exceed 31%, and the debt-to income ratio cannot exceed 43%, for the FHA to insure a new mortgage immediately. Borrowers with higher ratios — up to 38% for payments and 50% for debt — may still participate, but the FHA would require the three-month trial.
Rod Dubitsky, the head of Credit Suisse Group’s asset-backed securities research division, said the requirement that servicers try a payment plan before turning the borrower over to an FHA-insured loan left room for the original servicer and the new lender to clash over decision-making authority.
“There’s a ‘he said, she said’ potential from the borrower’s standpoint,” he said. The setup “requires the servicer and the FHA lender to work hand in glove.”
Observers said the FHA’s underwriting procedures for the program are also strict. New lenders must obtain two year’s worth of tax returns on the borrower from the Internal Revenue Service, among other things.
The eligibility requirements released Wednesday also dictated that loans be originated before this year. Borrowers must have made at least six payments and must not be able to make more. Borrowers are banned from participation if the mortgage is not on their primary residence or if they own a second home. The new loans cannot exceed $550,440.
At a press conference announcing the details, HUD Secretary Steve Preston said it was open to improvments. “We will continue to listen to the industry as they adopt the program and experience homeowner needs.”
HUD officials and observers said they were hoping that the passage of a bailout bill for the financial industry would make the program more efficient.
Under the existing program, lenders considering making new loans to struggling borrowers would not have any up-front financial incentive. They would only be able to share in the possible future appreciation of the borrower’s home. The bailout bill, which the Senate was expected to pass Wednesday, would authorize the FHA to pay the new lender up front instead. The bill also would encourage servicers to use the program for eligible loans purchased by Treasury as part of its proposed facility to buy $700 billion of troubled mortgage assets.
FHA Commissioner Brian Montgomery would not comment specifically on the fate of the two changes to the plan that are in the bailout bill, but he said HUD was still making improvements to the plan.
“We’re kind of flying the plane and fixing it at the same time,” he said. “Our work doesn’t end today. A good bit of it does, but this product is out there for the next three years, so as we go forward we’ll adjust as we need to.”
By Emily Flitter
Hurricane Ike Update- Some Breaks on Bills Being Offered
Thursday, September 25th, 2008Power and gas retailers
*Reliant Energy is waiving late fees indefinitely and will be working with its customers on flexible payment terms and extensions to meet their needs, said communications director Pat Hammond.
Reliant, which has about 1.8 million customers in Texas, also has suspended its credit and collection activity and has stopped disconnecting customers for non-payment.
“We realize that Hurricane Ike has created a lot of difficult financial hardships for people, and we want to do what we can to work with our customers during this difficult time,” said Hammond.
“We ask customers to call us and work out a payment with us,” she said.
*Green Mountain Energy is waiving late fees for customers who call in and let the company know they were affected by Ike, according to a statement from the company.
Green Mountain also is extending its deferred payment plan.
*CenterPoint Energy’s natural gas customers affected by Ike will not receive late notices and late fees will be waived, said spokeswoman Leticia Lowe.
In addition, the utility will also waive security deposits for customers displaced by the storm, she said.
Banks
*Compass Bank has waived access fees to its network of ATMs in Houston and other cities in Texas where it figures Houstonians fleeing the storm may need quick cash, said Thomas Graham, executive vice president of communications in Houston.
The bank also is allowing its small business and consumer customers to defer their loan payments, such as car and recreational vehicle loans. The deferral is up to 60 days depending on the customer’s individual circumstances.
Customers who need early access to their certificates of deposit can have them without paying early withdrawal fees, he said.
And late payments will be forgiven, he said.
Graham stressed – as did other service providers – the importance of giving notice that a payment will be late.
*Capital One is working with its customers affected by Ike on a case-by-case basis, said spokeswoman Pam Girardo in McLean, Va.
The bank has a hardship policy and some examples of what it can do for its customers include waiving late fees, going-over-credit-limit fees and non-sufficient funds fees, she said.
Capital One will also consider reducing a customer’s minimum payments, deferring payments for a limited time, waiving finance charges and waiving accrued interest.
Customers need to call and discuss the options, said Girardo.
Capital One also waived the ATM fees for all its customers who use a non-Capital One machine and has suspended all of its collection activity in the area.
*Comerica has waived ATM fees for customers who use non-Comerica machines and has expedited its process to boost credit card limits, according to spokeswoman Pamela Cathion.
The bank is also offering to donate up to $100 to a charity or community relief organization designated by a new customer who opens a bank account with at least $2,500.
*Discover makes special payment considerations on a case-by-case basis to cardholders affected by a natural disaster, said spokesman Jon Drummond.
Those provisions include, but are not limited to, allowing them to delay payments, and waving minimum payments, late fees and other charges for specific amounts of time depending on a customer’s need.
*American Express spokeswoman Molly Faust said the company will handle each cardholder’s situation on an individual basis. If you need help, please call the toll-free number on the back of your card, or visit americanexpress.com and click on “Hurricane Response: Assistance for our Customers.”
*Chase is asking its customers facing financial difficulty to contact the bank as soon as possible and it will work with them on an individual basis, according to spokesman Greg Hassell.
Telecom companies
*T-Mobile is topping off pre-paid cell phones that were running low at no charge to make sure people don’t run out of service, and it has suspended collections calls in Houston and Galveston.
*Sprint is waiving roaming fees, call-forwarding, late fees and overage charges for customers who use more minutes or text messages than they’re allowed between Sept. 9 and Oct. 11, said spokeswoman Kristin Wallace. The company is also offering free call-forwarding service and Sprint has suspended collections calls and service disconnections.
*AT&T has suspended all disconnections and collection activities. The company is providing free local and long-distance calling in all of its retail stores, and is offering free Wi-Fi service to anyone at all area Barnes and Noble locations, said spokesman Dan Feldstein.
AT&T will work with customers on their billing on a case-by-case basis. AT&T also offers its customers rollover minutes, allowing them to absorb a month in which their usage is heavier than normal.
*Verizon Wireless is giving one month of free service in the 409 area code and has suspended collections calls in the Greater Houston area, said spokeswoman Gretchen LeJeune.
*Verizon, which provides landline phone service in several cities around Galveston Bay, has suspended collections calls and disconnections, said spokesman Lee Gierczynski.
*Comcast has suspended disconnections and collections, said spokesman Ray Purser.
*Time Warner Cable, which provides cable service for Beaumont and parts of Southeast Texas, has credited customers’ accounts back to Sept. 12 and will extend credits until service is restored, said spokesman Gary Underwood. The company also is not disconnecting customers or making collections calls.
Insurance
*Allstate is offering deferred billing options, according to spokeswoman Kristen Beaman. The company will send affected customers a letter, but those who have been relocated can call their agent or 800-547-8676.
*USAA will waive late fees if customers are a few days behind, according to spokesman Justin Schmitt. The company, which also has a bank and offers financial services, also will offer fixed-rate new vehicle auto loans as low as 5.39 percent for people who lost cars in floodwaters. In addition, it will waive insufficient funds fees on checking and savings accounts.
Some breaks on bills being offered
By L.M. SIXEL, BRAD HEM AND DAVID ELLISON
Copyright 2008 Houston Chronicle
FHA Underwriting Changes – Rental Income
Tuesday, September 23rd, 2008The FHA is now taking steps to respond to “unhealthy” practices regarding the housing market, especially with FHA and FHA Approved Lenders.
We have seen first-hand, and taken hundreds of applications on, homeowners that are vacating their current residences to purchase another property. Due to rising fuel costs, most people have been relocating to be closer to their work and other great home buying opportunities in their local areas, and in turn, do not want the responsibility of having to pay 2 mortgage payments per month. This being said, the average consumer is under the impression, that with FHA, their rental income should count in qualifying for the NEW home that they are buying- but that MAY not be the case in the near future.
Essentially what is happening is that the Federal Housing Administration is cracking down on their guidelines in regards to potential home buyers that are planning on qualifying on the new home by using the rental income from their current house. Effective immediately, RENTAL INCOME from their current residence cannot be used in order to qualify for the new home.
We are closely monitoring the temporary underwriting change to see if this will soon evolve into a permanent rule.
There are 2 exceptions to this, however, and they are :
1.) Relocations – The home buyer is relocating with their current employer, or being transferred to an area not within reasonable and locally recognized commuting distance.
2.) Sufficient Equity in Vacant Property – The home buyer has at least 25% equity in the property, as determined by a residential appraisal no more than 6 months old.
If the applicant ALREADY OWNS rental properties that are disclosed on the application, that is OK; this rule ONLY applies to a principal residence being vacated in favor of another principal residence.
Rest assured that you will be the first to know on the ongoing process of guideline changes, as we at FHALoanHouston.com are your FHA Loan Experts!
FHA Streamline Refinances
Wednesday, September 17th, 2008With mortgage rates taking a tumble over the last few days, loan officers with customers who have an FHA insured mortgage have been calling frantically to get them locked in at a lower rate.
What is an FHA streamline?
FHA Streamline refinance is a program designed to give borrowers who already have an FHA insured mortgage the ability to refinance to a lower rate without the expense and hassle of a traditional refi. Typically that means no appraisal, no credit check (other then a mortgage reference to make sure they have been on time and you can be late up to 2 times in the last 30 days depending on the lender), no employment information and little or no fees.
You need to remember that FHA is an insurance policy and not a lender. When you put that into perspective you realize that it is in the best interest of the FHA program to allow for streamlines. Lower payments equal less likely to default on there obligation which in turn means less of the FHA insurance pool being used up. Its just like regular insurance, its there but no one wants to use it unless they have to!
So when rates go down- FHA streamline is the way to go to lower your monthly payments.
Interested in a Streamline? Visit www.FHALoanHouston.com today and apply!
HR 6694 (Down Payment Assistance)
Wednesday, September 17th, 2008Here is the resolution that just passed the House Financial Services Committee and is next up for a vote on the house floor. This could bring back down payment assistance programs. Here is what the resolution proposes):
H.R. 6694 will reinstate FHA seller down payment assistance for persons with certain credit scores by establishing three classes of eligible borrowers:
- Those with FICO scores above 679 will be allowed FHA seller down payments under current HUD guidelines.
- Those with FICO scores of 620 through 679 will pay a risk-based mortgage insurance premium to cover their possible defaults in the amount of 3.0% of the original principal for a single premium AND 1.25% of the principal balance as an annual premium.
- Those with FICO scores of less than 620 who may be deemed as eligible by HUD for FHA seller down payments will be subject to HUD-established risk-based pricing.
H.R. 6694 will also create an on-time payment incentive based upon a refund of premiums paid in excess of normal premiums if the borrower makes on-time payments for a specific number of years and pays the mortgage obligation in full. If these requirements are met, the borrower will receive a refund in the amount of the difference between the amount normally paid and the amount actually paid.
HUD Will Require 3.5% Down Payment for FHA Loans
Tuesday, September 16th, 2008HUD has posted changes to the required down payment structure. These changes are effective for case numbers assigned on or after January 1, 2009.
HIGHLIGHTS:
Effective Date
Case # assignments on or after January 1, 2009
Down payment
3.5% and can no longer consist of Borrower paid closing costs.. i.e. the entire investment is via true down payment (96.5% LTV MAX)
LTV
96.5% max based on the lesser of value or sales price
Refinances
Up to a 100% LTV which includes the UFMIP (i.e… the base loan amount + UFMIP cannot exceed 100% of the value*).
The effective date for this change is for case number assignments on or after January 1, 2009
*lesser of the original purchase price or value if not already FHA insured. Cash out refinances remain limited to 85% LTV or state mandated restrictions. Subject to statutory loan limits as determined by the subject property county.
Please let me know if you have any questions. I’m sure I’ll run into some investor bulletins, and possibly more HUD mandates between now and the effective of these changes and I will alert you to these if/when they are posted.
FHA Modernization
Tuesday, September 16th, 2008FHA Modernization
Brian Montgomery, Assistant Secretary for Housing, has testified before the House Financial Services Committee that modernizing the Federal Housing Administration is of paramount importance for America’s “troubled subprime borrowers.” The FHA has been insuring mortgage loans for low and moderate income families since the depths of the Great Depression, but these loans became unpopular with the advent of the subprime market.
However, subprime mortgage loans have proven to be extremely risky for borrowers with bad credit or low income, a problem which has resulted in a recent surge of foreclosures. Home foreclosures not only force borrowers out of their place of residence, but also cost the lender an average of $40,000 and can wreck havoc on real estate investors, lenders, and communities at large.
By approving of the modernization reforms, Montgomery claimed that the “FHA could potentially assist tens of thousands more borrowers who need an exit strategy from their subprime mortgages.” Some of the proposed changes include:
- Removal of the mandatory 3% down payment, which many low income borrowers cannot afford. The FHA plans to switch to a more flexible down payment option.
- Increasing the limits of FHA mortgage loans. Traditionally, FHA had standard loan limits which were often lower than those of subprime mortgage loans. In areas of the country where housing costs are relatively high, many individuals looking to purchase a home could not, as the old FHA loan limits were below the median house prices. With these changes, people in states like New York and California will be able to obtain an FHA loan that will have a loan limit high enough for homes in those areas.
- Creating a new risk-based structure. Currently, all borrowers who apply for an FHA loan are subject to a standard premium. In the new structure, the premium would be based on the credit profile of the borrower and would shift up or down based on that borrower’s level of risk to the lender.
All of these modifications are part of the Expanding American Homeownership Act which passed the House last year by an overwhelming majority. With this new structure, the FHA would not only be able to reach thousands more borrowers, but it would present “a safer, more affordable financing option than many subprime loans,” according to Montgomery. By modernizing its practices and requirements, the Federal Housing Administration will be able to continue increasing homeownership among low-income Americans, minorities, the homeless and the elderly.
Though these sweeping changes to FHA policy will give the most aid to first-time home buyers and families without previous mortgages, the FHA will also continue to offer refinancing options for those who are still working on another loan. As previously noted, many low and moderate income families have found themselves unable to make monthly mortgage payments, mainly due to risky and financially unsound loans. As more and more individuals wish to refinance to a safer, more stable loan, the FHA is there to assist. The number of conventional to FHA refinances has almost doubled in the last year, and as long as borrowers meet a few simple requirements, they will qualify for a more reliable FHA refinance.
- MortgageLoanPlace.com