We’ll get more details later today, but it looks like it’s going to get harder and be more expensive to get an FHA loan. A couple of main points to consider:
- FHA is currently losing money by the truckloads, so something has to change.
- The increased FICO scores, larger downpayments and reduced seller concessions will probably weed out a few people, but not that many.
- It will make it more expensive to buy a house FHA.
- At first glance, the part about scrutiny of the lenders seems like it really wouldn’t affect borrowers, right? Wrong, here’s why. If FHA becomes more demanding in terms of their buy back provisions with lenders, guess what, lenders are going to be looking at absolutely every little detail on the loans to make sure that they comply with the guidelines. Your borrower needs to have 12 months on the same job and he’s only at 11.5 months? Sorry, wait two weeks. The paystubs are dated 31 days before application and we need 30 – sorry, got to get another one. The bank statement, well, you get the picture.
I’m working on a post outlining the details of what Fannie is doing next week Saturday with their new guidelines. Fun times…..
Tom Vanderwell
FHA to Toughen Mortgage Rules in Lenders Crackdown – Real Estate * US * News * Story – CNBC.com
Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.
While FHA Commissioner David Stevens said in an interview on CNBC following that release that the FHA would not need additional federal funding to meet its loan losses, he added that FHA will be looking for new ways to reduce risk.
Those steps will include raising minimum borrower FICO scores, requiring larger down payments, and reducing the maximum permissible seller concession from six percent currently to three percent.
It could also include raising up-front and/or annual insurance premiums, which would require Congressional authority. This is according to the testimony HUD Secretary Shaun Donovan is scheduled to present to the House Financial Services Committee on Wednesday afternoon, obtained by CNBC.
In addition to changes for borrowers, Secretary Donovan is proposing increased lender accountability.
“We will hold lenders accountable for their origination quality and compliance with FHA policies,” Donovan will tell lawmakers.Gee – do you think they should have done that a long time ago?
Technorati Tags: FHA Mortgages,
Missy Caulk says:
Oh great, they take away the home buyer assistance program and now this. How will first time home buyers ever get in a home and reduce inventory.
I think that they are all getting use to saving 3.5% now even more. Yikes…
December 2, 2009 — 11:14 am
matt mathews says:
Take away all the fraudulent mortgage loans sitting on the FHA books and you wouldn’t have to implement any of these old/new rules. Real Estate is a greedy business and always will be with or without rules.
December 2, 2009 — 11:58 am
Greg Swann says:
Tom, you’re on fire. Great job.
Do you have specific numbers on the new requirements?
December 2, 2009 — 1:57 pm
Tom Vanderwell says:
Greg,
Thank you.
According to http://portal.hud.gov/portal/page/portal/HUD/press/testimonies/2009-12-02 here’s what we’re looking at so far:
1. Maximum seller contributions of 3% not 6%.
2. Increase minimum FICO scores (currently at 620 – but they aren’t sure what they will raise them to yet.)
3. Increase the “skin” that borrowers have in the game – not sure how they are going to do that yet, but no matter how, it’s called more downpayment.
4. They are going to raise their mortgage insurance premiums. They don’t know which way yet, but they are.
There, now you know what I know……
Tom
December 2, 2009 — 4:07 pm
Greg Swann says:
> There, now you know what I know……
Don’t I wish! Thanks for the news, though.
December 2, 2009 — 5:01 pm