All posts in Guideline Changes

FHA To Announce Changes Today

by Justin Miller on January 20, 2010 in FHA Loans, Guideline Changes with No comments

The WSJ reported that FHA will announce today that they will increase the upfront mortgage insurance premium charge from 1.75% to 2.25% along with lowering the seller contributions from 6% to 3%.  I think the seller contribution part is smart and I guess they have to increase the premiums to protect from future losses but it still doesn’t address lending with regards to debt to income ratios and reserves. 

The articles also states “The FHA will keep minimum down payments at the current 3.5% level for most borrowers. But the agency will require riskier borrowers with credit scores below 580 to make a minimum 10% down payment. While the FHA doesn’t have a credit-score cutoff, most lenders require a minimum 620 score.”  If you have below a 620 credit score you shouldn’t be able to buy a home unless you put at least 30% down. That is just stupid and what is even worse is the fact they FHA has been lending to borrowers with 580 and lower credit scores up until today with just 3.5%.  

http://online.wsj.com/article/SB10001424052748703837004575013690004466692.html?mod=rss_Politics_And_Policy

FHA Walks A Tightrope

by Justin Miller on January 19, 2010 in FHA Loans, Guideline Changes with No comments

The article states that tightening the credit standards could have a devastating affect on the economy.  Well, I think it’s the exact opposite.  If they don’t tighten the bar we will be in trouble.  This is a marathon, not a sprint so let’s start using our heads.  You are giving loans to people who have high debt to income ratios and no money leftover after closing.

FHA’s commissioner left something out of this statement.  “David Stevens bought his first home almost 25 years ago, paying just 3% down with a loan backed by the Federal Housing Administration. “I had no money in the bank,” he says. “If it weren’t for the FHA, I wouldn’t have gotten that home.”

What did he leave out?  Things are different now.  We have automated underwriting systems that tell you whether to give someone a loan or not.  Back then you had a human being who had to follow debt to income ratio standards that are not as loose as they are today.  You had lay away 25 years ago.  You didn’t leverage anything and everything. 

http://online.wsj.com/article/SB10001424052748704586504574654710172000646.html?mod=rss_Politics_And_Policy

HUD Suspends The 90 Flipping Rule Subject To Conditions

by Justin Miller on January 16, 2010 in FHA Loans, Guideline Changes with No comments

This is good news but make sure to read the conditions and click on the attachment. 

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.  The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes…

…The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.  To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.  
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website at: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

To read this press release in its entirety, please visit: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011

Fannie Mae’s News Release On Condo Changes

by Justin Miller on January 7, 2010 in General News, Guideline Changes with No comments

Date:               January 7, 2010

Fannie Mae Launches “Special Approval” Designation to Support Florida Condo Market

Realtors Commend New Flexibility

WASHINGTON, DC – Fannie Mae announced today that it is undertaking a comprehensive review of hundreds of condominium projects in the state of Florida in an effort to allow additional projects to become Fannie Mae-eligible through a new “Special Approval” designation. 

A dedicated team of six Fannie Mae professionals based in Florida is conducting a thorough examination of condominium projects across the state that may not currently meet Fannie Mae’s standard eligibility criteria and assessing specific criteria more closely, including occupancy, homeownership association dues, financial stability of the project and property condition.  Projects deemed to be sufficiently stable following the closer examination are granted a “Special Approval” designation, meaning lenders can originate and deliver mortgage loans secured by units in these projects to Fannie Mae.

Fannie Mae has been granting exceptions to its condominium eligibility guidelines on a case-by-case basis when requested by lenders.  The “Special Approval” designation streamlines the process for lenders and catalogues projects across the state that are Fannie Mae-eligible.  Projects deemed eligible will be listed on www.eFannieMae.com as project reviews are completed, and qualified borrowers wishing to purchase units in these projects will be eligible for financing.

“This new initiative is geared toward providing maximum support for Florida’s distressed condo market as we continue to provide liquidity to the housing market more broadly,” said Karen Pallotta, Executive Vice President, Single Family Mortgage Business.  “The state’s condo market has been particularly hard hit by the housing downturn and we’re working with the industry and our partners to do all we can to stabilize the market and help spur recovery.”

“NAR applauds Fannie Mae for taking this important step to make condo loans more readily available in Florida,” said Moe Veissi, National Association of Realtors® First Vice President and broker-owner of Veissi & Associates Inc. in Miami.  “Our state is probably the hardest hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track.”

“Special Approval” designations are effective for periods between 9 and 18 months, and lenders are required to confirm the project’s Special Approval designation on the date of the loan application.    The Special Approval initiative is for established condominium projects only.

Florida Condo Loans Could Get Easier

by Justin Miller on January 7, 2010 in General News, Guideline Changes with No comments

And that’s not me saying it; it’s Fannie Mae who is.  I certainly hope they do because every time I even hear the word “condo” I cringe since they have made it so difficult to get financing.

I did however write about something very similar back in June based on the article here from The South Florida Business Journal http://southflorida.bizjournals.com/southflorida/stories/2009/06/15/story4.html 

The reason I bring this up is because the article below from today in the Sun Sentinel states “A team of six employees is reviewing hundreds of established condo projects statewide that may not meet Fannie Mae’s standard eligibility criteria for financing because of occupancy problems or high delinquency rates in homeowner association dues.”

I guess if I continually have to state “I am not a pessimist …” then maybe I am just in denial.  Or, is it just that I continue to read good news and a lot of it doesn’t happen?  You can be the judge.   

http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2010/01/fannie_mae_says_program_will_m_1.html 

The Good Faith Estimate In Plain English

by Justin Miller on December 23, 2009 in Conventional Loans, FHA Loans, Guideline Changes, Jumbo Mortgages with No comments

This is the best explanation I have seen thus far.  Keep in mind that the GFE doesn’t take into account suitability i.e. how long they plan to live in the home, how long they plan on having the loan, reserves, children, etc.  This needs to be done by the Mortgage Professional. 

To view this document click on the link below and then “Respa Plain English 12-09.”

http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm 

More On: The New Good Faith Estimate & HUD

by Justin Miller on December 23, 2009 in Conventional Loans, FHA Loans, Guideline Changes, Jumbo Mortgages with No comments

Below is the link for HUD’s new settlement guide that is for the consumer to better understand the new good faith estimate and HUD that goes into effect on January 1st, 2010.  This will be used for all residential real estate transactions. 

For a quick breakdown there will now be 3 different “buckets” of charges.  The first bucket will be all of the origination fees that go to the lender which are lumped together as one.  These fees cannot change unless the interest rate expires, zero tolerance.

The 2nd bucket is “All Other Settlement Fees” which consist of the Appraisal, Credit Report, Upfront MIP, Flood Cert, and Tax Service Fee.  The Title Services  and lenders title insurance ($25) lumped as one, Owners Title Insurance,  Survey and Pest Inspection, Recording Fees, Intangible Tax and Doc Stamps (goes in the “Transfer Tax” spot, #8).  Numbers 3 to 8 have a 10% tolerance. 

The 3rd bucket is Numbers 9 to 11 which have an unlimited tolerance and consists of the escrow account, daily interest, and insurance. 

The new GFE will NOT show the borrower how much cash they need for closing. 

The new HUD will show the estimates from the Good Faith Estimate and have a breakdown of how much the figures varied. 

It is very confusing so if you have any questions feel free to email me. 

http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement%20Booklet%20December%2015%20REVISED.pdf

Mortgage Insurance Companies & Lenders Ease Down Payment Standards

by Justin Miller on December 21, 2009 in Guideline Changes with No comments

This is a positive sign for some parts of the US because now you will be able to get a Conventional loan with only 5% down versus the 10%.  Not for Fort Lauderdale and the rest of South Florida though. 

In South Florida to be able to put 10% you have to be buying a single family detached home, have a minimum of a 720 middle credit score, and a maximum debt to income ratio of 41%.  The article below states that in New Orleans you only need a 680 credit score.

“We’ve seen some stabilization in the housing market,” said Kevin Schneider, president of Genworth. While “additional home price declines” are likely, he added, tighter credit standards, including the requirement of full documentation and higher credit scores, should limit delinquencies.”

http://online.wsj.com/article/SB126118008009797749.html#mod=todays_us_page_one 

FHA’s Policy On Short Sales

by Justin Miller on December 17, 2009 in Guideline Changes with No comments

FHA just came out with their new mortgagee letter on short sales and short payoffs.  To read it in its entirety go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf 

To summarize it, if you paid your mortgage on time and were not taking advantage of the declining market and are not purchasing a similar or superior property within a reasonable distance you can get an FHA mortgage. 

If you did a short sale and did not pay your mortgage you have to wait 3 years unless the can show that the default was due to circumstances beyond your control and the review of the credit report indicates prior satisfactory credit.

FHA Condo Process

by Justin Miller on December 2, 2009 in FHA Loans, Guideline Changes with No comments

Starting December 7th, 2009, FHA is changing their condo approval process and the list at https://entp.hud.gov/idapp/html/condo1.cfm to the new approval method, HRAP/DELRAP.  If you want to know what those to mean and you are in Florida then all you need to know is what HRAP is.  It means that the condo has to be submitted directly to HUD for approval.  You can do spot approvals up until February 1st, 2010. 

If you want to fall asleep right away and/or have your head spin, then you can click on this link http://www.hud.gov/groups/lenders.cfm, under “What’s New,” click on “FAQs ML 09-46.”  If you don’t want to do that then you can certainly call or email me with any questions. 

“The Mortgagee Letter states that projects will need to be recertified every 2 years. If a project approval has expired or will expire in the near future does the case numbers have to be issued by the time of expiration, the loan approval or actually closed?  FHA will move all currently approved condominium projects to the new Project Approval Condominium List in the FHA Connection database.”

If the project is on HUD’s approved list that doesn’t mean it is a done deal because the lender has to certify that they are not aware of any changes that would not comply with FHA.

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