Go figure, the only constant in the mortgage world is still change...and plenty of it!
On that note, I'd like to mention some upcoming changes which we should all be aware of since they will change the way FHA business is done. Initially, it's no secret that FHA is being inundated with claims and is looking for ways to shore up their balance sheets. One of the more significant changes is that FHA will require a higher level of appraiser qualifications (fewer appraisers on the list) and will also ENFORCE HVCC (as of Jan 1). The HVCC (Home Valuation Code of Conduct which eliminates discussion between lender/other interested party with the appraiser and disallows any conversation with appraiser regarding value) portion of this is somewhat surprising; since most of the communication from HUD was that they were not adopting it. So be aware that longer turn times and increased value concerns are on the way for FHA. You can still provide a copy of the contract on purchase and construction deals. Although our office is prepared for the change and expect very little difference in our provider's turn-times, it will affect the market as a whole. Interesting question: If one of the bills proposed in Congress to put a moratorium on HVCC passes, will HUD/FHA/Fannie/Freddie drop the requirement? (http://www.housingwire.com/2009/09/18/fha-changes-credit-policy-ahead-of-reserve-ratio-drop)
Another change which is being made is to increase in the net worth requirement for lenders who do business with FHA from the $250,000 set in 1993 to approx $1mil. So, plan on seeing some loan officers from smaller, independent shops move around again to realign with companies who meet the new requirements.
A new bill was just introduced to Congress which would change the FHA minimum down payment from the current 3.5% up to 5% (http://www.thetruthaboutmortgage.com/bill-aims-to-increase-fha-down-payment-to-five-percent). This same bill will also prohibit the financing of closing costs. There are also some rumblings of higher credit score requirements, much stricter debt-to-income ratio limits, and revision of Reverse Mortgage products, but nothing concrete that I've seen.
The Federal Reserve is also discussing extending the mortgage backed security purchase program so that they can ease out of the market. I like the thought of an extension, but not for the sole purpose of phasing out the program (unless volumes pick up enough from other funding sources that it will not pose a strain on pricing or another liquidity crunch) ...it seems to be working and there's still another wave of foreclosures to hit the market (appx. 7 million units, nationwide). Time will tell the whole tale...things are still changing by the minute!
As always, thank you for taking the time to read my article and I look forward to your comments.
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