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FHA Mortgage Reform: Still Waiting

Will the FHA modernization legislation ever be passed? I watched the President's press conference today and the thing that really stuck out to me was that the FHA Modernization bill which has been around since April of 2006 and it is still sitting - in it's second incarnation - in the Senate with no action.

According to CNN, when asked about the FHA modernization bill, "'It's difficult to get anything up for a vote in the Senate right now, including common-sense bills like this one,' said Jim Manley, a spokesman for majority leader, Harry Reid." It looks like the bill will not get voted on this year.

Keep in mind that FHA can help many borrowers just the way it is. No changes needed. IF you know what you are doing.

As someone who spends a lot of time training loan officers to do FHA loans, I am finding that many who have done very well over the past 3 or 4 years have never bothered to learn how to do FHA loans. I still see them on the mortgage broker forums asking where they can find stated income programs at high loan to values, and when you ask why they say because the borrower is self employed. They have no idea if the borrower would qualify if they actually analyzed the borrower's tax returns, because they grew up in the mortgage business during the heyday of stated income, stated asset loans. They have never looked at a borrower's tax returns before. I also see them wondering how many lates FHA allows within the past twelve months because they are accustomed to grading loans off a subprime matrix that has no room for common sense underwriting.

Two things need to happen right away. The first is that the Senate needs to get off the mark and do something about FHA modernization and quit sitting around playing politics while people lose their homes when they don't need to. The second is that loan officers need to break out the books and do what it takes to really learn how to do mortgages. Not just how to fax applications over to their account rep.

Just my $.02 for the day.

Carl Pruitt is a 22 year veteran of the mortgage/real estate businesses who helps other loan officers learn about the advantages of originating FHA mortgages.

Posted by Carl Pruitt - http://FHALoanAdvice.com on 12/06/2007 06:05 PM

Comments (7)

fha reform, fha training, fha modernization bill

7 Comments on FHA Mortgage Reform: Still Waiting

DEC

2007

Everything I've heard is that absolutely nothing will happen this year. Then when you look at it, nothing will happen until after elections. Then what is the excuse that everyone can come up with to keep from taking action.

Amen Carl. But FHA can already help a lot of folks out, and HUD has modernized quite a bit. Agents need to know that the old disincentives for using FHA are largely gone....no FHA non-allowable fee (other than the tax service fee), no mandatory pest report or clearances, no VC list. For all intents and purposes, FHA has achieved parity with conventional loans.

Furthermore, a Mortgagee letter that came out I think in '05 took the max CLTV limit off FHA refis. This was kind of a pre-cursor to the still wrinkled up FHA Secure, and it doesn't require that the borrower be in default due to a reset.

The biggest problem I'm having with unlimited FHA CLTV refi's--FHA Secure or otherwise--is that it usually requires the existing 1st or 2nd lienholder to resubordinate. If you can find them, and it turns out not to be a loan committee for the Bank of China, good luck getting them to agree.

You stated what I was thinking after reading the President's announcement today. I have spent the past months learning everything I can about FHA. I hope this new plan is not just to calm the public. Maybe we can see some immediate measurable results.

DEC

2007

Well the government is slow like always. They say something that could change things a great deal and now they hold on and do not act. The problem most people have.

DEC

2007

Looks like there has now been some movement! They may vote on the bill next week.

We might end up with 100LTV 40 year mortgages under FHA!

AUG

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SEP

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