ANYONE LOOKING FOR A NEW OR REFINANCE FHA INSURED MORTGAGE NEEDS TO STOP AND READ THIS. BELOW YOU WILL FIND A MEMO POSTED BY FLAGSTAR BANK WITH REGARDS TO M A J O R CHANGES WITH THEIR FHA PROGRAM.
I WANT TO BE CRYSTAL CLEAR. THESE ARE NOT CHANGES TO FHA GUIDELINES THESE ARE CHANGES TO FLAGSTAR BANK GUIDELINES THAT WILL AFFECT BROKERS AND FOLKS THAT HAVE WAREHOUSE LINES WITH FLAGSTAR BANK. I ALSO HAVE AN ADDITIONAL MEMO FROM HOMETOWN MORTGAGE WITH THE SAME CHANGES.
I am not chicken little and the last I looked the sky is not falling. I am not trying to create a stir and pass bad information. As a professional mortgage broker I feel that it is my responsibility to keep my business partners, potential partners, clients, and prospects aware of major changes that can have a major impact with your mortgage structure. Along with posting here I will also send out a email to my data base to spread the word.
I do not have any information that any other investors will change policy but if this takes the same road that mortgage insurance is taking I highly recommend to all parties to make some purchase or refinance mortgage decisions immediately.
Thanks for reading. Your comments are greatly appreciated.
Tony Grego - Sagamore Home Mortgage, Indiana Mortgage Broker
"SUBJECT AND EFFECTIVE DATE
Effective Monday, February 18, 2008, Flagstar is instituting several updates to our FHA credit and appraisal standards, as well as instituting new credit score-based pricing improvements and adjustments.
FHA CREDIT UPDATES
The changes are as follows:
Ø All FHA loans will now require a minimum credit score of 550.
Ø Cash-out refinances loans over 85% LTV will now require a minimum 580 credit score, regardless of the Total Scorecard response.
Ø Cash-out refinances for manufactured home loans over 85% LTV will now require an Accept or Approve response from Total Scorecard in addition to the minimum 580 credit score introduced above.
Ø Borrowers currently in Chapter 13 bankruptcy will be limited to a maximum loan-to-value for cash-out refinance transactions of 85%, regardless of the Total Scorecard response.
Ø Borrowers with a previous Chapter 7 bankruptcy who have late payments after the bankruptcy has been discharged will be limited to a maximum loan-to-value for cash-out refinance transactions of 85%, unless an Accept or Approve response is received from the Total Scorecard.
Ø Borrowers with a previous Chapter 7 bankruptcy will not be eligible for FHA financing if the bankruptcy was discharged within the past two years, unless an Accept or Approve response is received from the Total Scorecard.
Ø Borrowers with a previous foreclosure will not be eligible for FHA financing if the foreclosure occurred within the past three years, unless an Accept or Approve response is received from the Total Scorecard.
FHA APPRAISAL UPDATES
Appraisals for all manufactured home loans must use one of Flagstar’s approved national appraisal vendors. Refer to Doc. #4903 – National Appraisal Vendors for a current list.
SUBMISSION/CLOSING POLICY FOR LOANS ORIGINATED UNDER PRIOR GUIDELINES
Loans originated outside of these guidelines MUST be submitted to underwriting no later than Friday, February 22, 2008, and all such loans must be closed and delivered to Flagstar by Monday, March 31, 2008. Correspondent loans do not need to be purchased by March 31st, but they do need to be received by that date.
FHA PRICING CHANGES
New pricing adjustments will be as follows: Credit Score Range Pricing Adjustment
550-579 -1.000
580-600 -0.500
601-659 No adjustment
660-679 +0.125
680+ +0.250
These additional pricing adjustments will not apply to Flagstar to Flagstar streamlined refinances as credit is not run on such loans. If credit is run, underwriters will change credit the score to 999 so no credit-based pricing adjustments are applied.
WAREHOUSE LENDING GUIDELINES
Effective March 8, 2008, Flagstar Bank will not warehouse FHA loans being sold to other investors if the credit score on the loan is below 580, and we will begin imposing a 5% haircut for all DE Delegated FHA loans.
UPDATE TO FHA DE DELEGATED POLICY
All loans not insured by FHA within 60 days of disbursement will be subject to repurchase by the originating lender.
PRECEDENCE OF THIS MEMO
At time of this memo’s release, all necessary changes to fully implement these product updates may not have been completed within Flagstar’s systems. However, this memo takes precedence over system issues. Loans registered and/or locked in contravention of these new guidelines will be deemed invalid.
CONCLUSION
The FHA program descriptions will be revised over the next day or so, until such time as revised guidelines are posted, this memo will supercede any published guidelines to the contrary. For information about other Flagstar products, please refer to the Seller’s Guide available at wholesale.flagstar.com .
Thank you for your continued business."
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