All posts tagged FHA

Fort Lauderdale Mortgage Interest Rates Update: June 8, 2011

by Justin Miller on June 8, 2011 in Conventional Loans, FHA Loans, Interest Rates, Jumbo Mortgages with No comments

Mortgage-backed securities, which move interest rates, are improving once again today which is good for interest rates.  Interest rates paying NO POINTS in Fort Lauderdale and South Florida are as follows today on a $250,000 purchase price, 740 credit score, 25 day lock period, primary residence, single family detached home, with escrows are:

  •  4.625% on a 30 year Conforming fixed rate mortgage with 20% down (APR 4.72%)
  • 4.375% on a  30 year FHA fixed rate mortgage with 3.5% down (APR 5.265)

Call or email me for Jumbo Rates  and Adjustable Rate Mortgages in Fort Lauderdale and South Florida

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

Will FHA Require 5% Down?

by Justin Miller on October 9, 2009 in FHA Loans with No comments

Some lawmakers are trying to make that happen.  What are my thoughts?  It probably isn’t a bad idea since the more “skin” you have in the game the less likely you are to just walk away from a home.  I think more importantly isn’t so much credit scores, although it is important, but the debt to income ratios and having reserves after closing.  Fannie Mae is updating their automated underwriting system on December 12th which will cap debt to income ratios at 45% and a maximum of 50% with compensating factors.  I would image this will affect FHA too.

Right now you can go up to 55% on an FHA loan and as high as 65% on a Conventional loan.  Remember, this is based on gross income and does not take into account groceries, insurance, dependents, gas, etc.  Only what is on your credit report.  I do understand in certain instances why you would allow a higher debt to income ratio but the automated underwriting systems are taking this into account.  There isn’t any human side to this.  Yes an underwriter has to review it too but the automated findings pretty much govern what can be done. 

“The FHA has announced a handful of measures designed to improve quality control and manage risk. But lawmakers last week introduced a bill introduced that would require larger down payments on FHA-backed loans , raising the minimum down payment to 5% from 3.5%. The FHA opposes such a move because the agency is playing a key role in helping breathe life back into the housing market.”

http://blogs.wsj.com/developments/2009/10/08/is-the-fha-headed-for-a-taxpayer-bailout/ 

More On FHA’s Delinquencies

by Justin Miller on October 7, 2009 in FHA Loans, General News with No comments

As I have mentioned before and predicted, FHA will fall below their 2% minimum reserve requirement.  The article below sheds some light on the situation with FHA and states that they will not need tax payer dollars. 

I heard someone on CNBC yesterday say that FHA is more leveraged than Bear Stearns was.  Although I do feel FHA has a lot of problems I certainly found that hard to believe and in fact it sounds as though it is false.  “Unlike investment banks, FHA’s reserves cover the next 30 years of projected losses in its financing account, instead of the two years required for investment banks. “

 That being said, I am still concerned that FHA is giving loans to a lot of borrowers that have no business buying a home and this could hurt our economy again down the road.  I know I am beginning to sound like a broken record but it is a privilege to own a home.

http://online.wsj.com/article/SB20001424052748704471504574447961541561366.html#mod=todays_us_opinion 

FHA’s Loan Modification

by Justin Miller on September 30, 2009 in FHA Loans, Foreclosure, Loan Modification with No comments

HUD just released an updated mortgagee letter with regards to their modification program.  It is kind of confusing because HUD states if your interest rate is 50 basis points (.5%) or more above market rate then they will lower your interest rate to no more than 50 basis points above market rate.  Huh?  I know but the bottom line is that they want to lower your payment instead of modifying it and it increasing like so many other modifications that are out there.

If you have seen the statistics on the amount of loans modified and the percentage that are back in default, it was somewhere around 60%.  What they leave out or people tend to miss is that a large percentage of that 60% had payment INCREASES.  Yeah, not much of a modification. 

To read the full letter click on this link

http://www.hud.gov/utilities/intercept.cfm?/offices/adm/hudclips/letters/mortgagee/files/09-35ml.doc 

Is Countrywide More Prudent Than FHA?

by Justin Miller on September 30, 2009 in FHA Loans with No comments

An article in The Wall Street Journal thinks so.  Although I wouldn’t go quite that far it isn’t too far from the truth.  Potomac Partners sent out an informative message about the current “potential” plight the FHA has, along with some predictions that make sense. First, with $30 billion in current cash reserves to pay claims, the FHA could pay claims for 50 months without considering any premium income from existing or new originations given their current rate. As for the future, Potomac Partners expects that the FHA will not only tighten their underwriting standards, especially in poorly performing products, but also develop their own automated underwriting system. Watch for increased post-endorsement reviews, greater counter-party responsibilities and indemnifications, and increased vigilance on wholesalers. Seller-servicers will be held accountable for the production of the originator, and “the FHA proposal, in effect, would be substituting the Direct Endorsement lender for the GSE seller-servicer.  We would expect the DE lender would have to underwrite and close the loan in its name.”

I would imagine this WILL happen. My personal opinion is that you should be required to have a 640 or 660 middle credit score, max debt to income ratio of 45%, 2 months of reserves, etc.  If you cannot save money then you shouldn’t be buying a home because there are extra costs that come with it.  You are responsible if something breaks, if your taxes and insurance go up, etc. 

http://online.wsj.com/article/SB10001424052970204488304574428970233151130.html?mod=rss_opinion_main 

FHA Losses Increasing

by Justin Miller on September 4, 2009 in Bailout, FHA Loans, General News with No comments

I and many others have mentioned before that FHA could be the next subprime debacle.  Their originations are getting close to $1 trillion just like Fannie Mae and Freddie Mac. 

FHA is required to keep a certain amount of reserves equal to 2% or more and according to the article they were at 3% as of last year.  “A senior official at HUD, which oversees the FHA, said there is “no risk” that the FHA would require money from Congress if the ratio falls below 2%. Asked about the agency’s capital ratio, the official said a report detailing that number won’t be completed until the FHA’s fiscal year ends Sept. 30.”

Call me a pessimist but I don’t believe for one second that there is “no risk” of falling below the 2% threshold.  Maybe it’s due to a lack of trust that I now have but at the same time I think this because I am in the business and see it from a micro prospective where they are only looking at it from a macro prospective.

Think about it, these borrowers are only putting down 3.5% and a lot of the time they are getting the seller to pay for closing costs and prepaids, getting a grant, etc, etc.  Many borrowers cannot save money and need this which is a risky business in my opinion.  I am not saying I don’t originate these loans because I do but god forbid they get a flat tire, their air conditioner breaks, etc. they are out of money.  It is very hard to break any habit especially spending habits.

“A bad habit never disappears miraculously; it’s an undo-it-yourself project- Abigail Van Buren.”  Many don’t have the discipline and it certainly isn’t easy. 

http://online.wsj.com/article/SB125202440174685297.html?mod=rss_Politics_And_Policy 

Will FHA Be The Next Fannie Mae?

by Justin Miller on August 11, 2009 in FHA Loans, General News with No comments

Quite possibly.  It is scary because Ginnie Mae which backs FHA loans is growing very fast and almost at a trillion dollars.  We own Ginnie Mae just like we do Fannie Mae.  Their default rate keeps increasing too.    

“Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.”

http://online.wsj.com/article/SB10001424052970204908604574334662183078806.html#mod=rss_opinion_main 

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