FHA IS on Solid Ground, Please CLICK on the link below for an interview with Dave Stevens, Commissioner of the FHA

Mortgage and Lending with John Tuggle, Senior Mortgage Loan Originator, Envoy Mortgage, Ltd. NMLS# 211187

In a recent interview with MS-NBC, the Commissioner of the FHA made some very interesting points.  A lot of this information is not widely known. Some key points that Mr. Stevens made were as follows:

1.  The FHA is not considering going to a minimum credit score formula for qualification at the present

2.  The FHA has $ 30 Billion in excess capital to cover risk to their portfolio and although foreclosures are and have been high, the capital in the bank is continuing to exceed the risk (delinquent borrowers).  The FHA WILL survive.

3.  FHA currently has no intention of going to "Risk Based MIP Premiums).  The current rate for most FHA loans is 1.75%.  The FHA currently plans to continue the moratorium on raising this with a Risk Based Pricing System (lower credit score, higher premium)

4.  The FHA is doing business with high quality borrowers.  The average credit score for FHA Borrowers has increased to 690 from 630.

Please click below for the interview.  It is very enlightening.



Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Lenn Harley 10/12/2009 07:01 AM
  2. Allison Ables 10/12/2009 01:09 PM
  3. Kathryn Vatsula 10/12/2009 01:28 PM
  4. Jason Burkholder 10/16/2009 08:16 AM
ActiveRain Community
Fort Bragg NC Relocation
Georgia Association of REALTORS®
InTown Columbus (Georgia)
please click on the link below for an interview with dave stevens
commissioner of the fha

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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I appreciate your updating us on the facts of what is going on with FHA.

Oct 12, 2009 03:59 PM #21
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

Jon, A very good post indeed,  I read a blog recently that predicted interest rates would go up quickly when the FHA will no longer be able to insure FHA and

and Va loans.

Oct 12, 2009 05:04 PM #22
Stephen Arnold
HomeSmart Elite Group - Scottsdale, AZ

Hey John~  Thanks for the update!!  FHA is where it is at right now!  All the best!

Oct 12, 2009 05:32 PM #23
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

FHA is a good deal in today's market ! Our average sales price has dipped below 200k which puts it in FHA territory !

Oct 12, 2009 11:42 PM #24
Dana Wilkinson
Connect Realty, The Woodlands, TX - The Woodlands, TX
Broker-Your TX agent for The Woodlands-Spring-Conr

I hope what was said is the truth and continues to be the case.  I work with a lot of first-time buyers and FHA is the mainstay of their ability to get into a home.

Oct 13, 2009 01:47 AM #25
Ben Giordano
RE/MAX Sun & Sea - Boca Raton, FL

Good info. Thank you

Oct 13, 2009 02:23 AM #26
Mark Warner
RealEspace - Plano, TX

Thank you for posting this positive information. The good news continues to trickle in!

Oct 13, 2009 02:40 AM #27
Debbie Rumsey
HomeSmart Realty West, Carlsbad, CA - Encinitas, CA
Realtor, Green, SFR

Good information to know!  Thank you for the post John and for the link to the video.  It is certainly nice to get some positive facts!

Oct 13, 2009 03:08 AM #28
Paul Carson
Mortgage Network Inc. - Philadelphia, PA

Graet post. Thanks.

Oct 13, 2009 04:08 AM #29
Rich Mendonca
Keller Williams - Las Vegas, NV

Glad to hear some good news on FHA, hopefully it stays that way.  I've been working with a lot of first time buyer's and if something were to happen to FHA loans, it would jeopardize their ability to buy their first home.

Oct 13, 2009 04:17 AM #30
Brad Howell
RE/Max Metro & Capital Creek Development, LLC - Seattle, WA

John, thanks for making this post. I'm hoping that the others who posted on here that they are glad the FHA is in good standing actually watched the video. He's good at choosing his wording carefully with the likes of: CNBC "Does the FHA have sufficient capital to back those loans?" Commissioner Stevens responds "That's a great question, at present, yes we do". Falling short of the legislative reserve of 2%... well, that was reserve number was put in there for a reason. 14% of FHA loans (per the interview) are in a bad place... that means that they are either in default, at risk of default, or being foreclosed upon and current estimates are upwards of 20% from last years originated loans and 24% from the year prior that may be close to default (see my blog for more info). And, a majority of those 14% stated in the video were originated within the last year - Uhmmm, a time when most buyers with good credit are going FHA to get into homes with reduced fees (down payments, etc.) so his argument about the fact that more people are coming from Freddie and Fannie to FHA who have better scores is true, but they still are defaulting at a very high rate which is also true.

I hate to play devils advocate here but I also cannot willfully put on rosy-colored glasses just because  the FHA Commissioner says everything is okay and life is good. We've heard that every time someone goes in front of the lawmakers haven't we? When will we finally "get it"?

I am certainly glad that they are actively taking steps to correct the missteps that got them to a 14% default, and I feel that the commissioner has not been in office long enough to make the necessary changes they will need in time. But given the fact that they do recognized the situation, (albeit in a bit of denial), and are working on taking steps to correct, I'm really hoping the FHA does not need a bailout as it is our last stronghold on keeping the housing market on a path to recovery.

Thanks again for the article and insight.



Oct 13, 2009 04:22 AM #31
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

More good news.  Now if the FHA would only allow families to qualify based on rent history rather than DTI ratios.  It is killing the self employed.

Oct 13, 2009 04:55 AM #32
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

Nice to see the other side of the story.  Very positive news.

Oct 13, 2009 10:22 AM #33
Daniel Boor
INPAC Enterprise - San Jose, CA

Unfortunitely, John FHA will inflict great harm on our industry!!

As per Mortgagee Letter 2009-19, the Federal Housing Administration (FHA) is implementing a new approval process for Condominium Projects for all case numbers assigned on or after October 1, 2009 (time extended to 11/01/09).

Previously, approved mortgagees were able to use either the existing FHA Approved Condo Project List or they could do “Spot” approvals for projects not on the Approved Project List.

As of October 1, 2009 (time now extended to 11/01/09), the “Spot Loan Approval” process (ML1996-41) will be eliminated and lenders will have two condominium approval project options:

1) HUD Review and Approval Process (HRAP.)

2) Direct Endorsement Lender Review and Approval Process (DELRAP.) The project approvals issued through HRAP or DELRAP are good for two years.

After October 1, 2009 (time now extended to 11/01/09), only approved condominium projects listed on FHA Connection that were approved on or after October 1, 2008 will be considered eligible. Please note that project approval will not be required on FHA to FHA streamline refinances or on FHA/HUD REO Division Sales. Additionally, Site Condominiums will not require project approval.

The new HRAP and DELRAP approval processes provide condo project approval for two years. This approval would not just be for the lender that approves the project through DELRAP; it would be for the entire lending community.

For instance, if ABC Bank approves XYZ Condominium Project, that same approval could be used by ANY Mortgage Co. if lending in the same development.

The DELRAP process carries considerable liability. ML 2009-19 states that “Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more that $1,000,000 or imprisoned for not more than 30 years or both.

In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.” No lender to date has informed FHA they intend to assume the liability and submit for project approval using the DELRAP process.

Presently, the HUD is running approximately 8 weeks for project reviews when all required documentation is submitted in its entirety. It should be noted that we expect that HUD’s turn times will most likely increase after October 1st up to approximately 6 months or more.

The foundation of the Real Estate Industry is the first time home buyer. The further restriction of financing available by FHA because of unreasonable time delays will reduce their ability to be a home purchaser and has to impact all the market intricacies and the overall Real Estate market value.


Oct 13, 2009 11:56 AM #34
Monica Hess
Feng Shui This Kentucky - Lexington, KY
Kentucky's Feng Shui Master

Actually, I found this a bit scary.  Sounds too much like how wonderful Freddie and Fanny were doing before their implosion.  Me thinks thou protesteth too much, big government.

Oct 14, 2009 12:03 AM #35
Dianne Hicks
Realty ONE Group - Poway, CA

thanks for great info.

Oct 14, 2009 02:01 AM #36
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

Link is no longer there with FHA Dave Stevens.

Oct 14, 2009 05:09 AM #37
John Tuggle

This comment is for Monica Hess (see above).

I really don't believe you can compare Fannie/Freddie with FHA at all.  First, Fannie and Freddie were publicly owned companies that basically did not maintain the reserves that Mr. Stevens discusses.  Also, both Fannie and Freddie engaged in purchasing loans outside the scope of their own programs (see "Fannie Loves Bear Stearns").  FHA is only guarranteeing those loans that are in full compliance with their underwriting guidelines of which are more strict now than ever before.  If Fannie and Freddie had of conducted business they way FHA is and for the most part has in the past then much of what happened would not have happened.

Finally, Mr. Stevens references the FHA mission on a couple of occasions in the interview.  FHA is part of the government and the mission has been the same throughout it's history.  I am not saying that FHA and HUD did not have issues over the years but many of them were cleaned up prior to the Bush Administration taking office.  The Bush Administration also advocated cleaning up Fannie and Freddie way back then (as did previous administrations) and the warnings were ignored.

I hope this helps shed a little more light on the differences.

John Tuggle

Oct 14, 2009 05:25 AM #38
Mark Velasco
Sharpstone Commercial - Whittier, CA
Top Producing COMMERCIAL Team 30+ years experience

Thanks for the information John. It is good to know. However, raising the minimum credit score might create some issues.

Oct 15, 2009 06:23 PM #39
Dolores "Dee" Mauriello
Keller Willaims - Wayne, NJ
Realtor, Homes For Sale Wayne NJ

I agree with Brad's comment about not putting in rosycolored glasses, after hearing about 14% delinquencies on FHA loans  and 1/3 made in the past year.

Oct 18, 2009 02:38 PM #40
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