Foreseeably Harder Approvals: FHA gets tough

I'm mixed on a lot of this.  I think loose requirements and a lot of stupidity are how we got here.  However, there are many people, especially first time buyers in an expensive place like Orange County, who won't be able to buy with higher down payments.  People may argue that maybe they shouldn't but when you look at $400,000 homes (which is fairly low around here), that's a lot of money to have put aside especially when you include closing costs. 

Would the extra money be better saved for a rainy day so a mortgage payment could be made from it if needed?

Ken,

As FHA, Fannie Mae and Freddie Mac keep absorbing losses, it's kind of a done deal that they'll have to tighten guidelines. And that will just prolong the real estate market's recovery as fewer consumers will qualify for mortgages.

having been a loan officer for 30 yr(Realtor now) and my wife 25 yrs...we were doing FHA when  it was  not  popular and agents got mad at us for going FHA, we used FHA to help the borrower, instead of going subprime, SISA, NINA... these type of loans werw not good for the buyer/borrower and the loan officer doing those loans made more money...

NOW those worthless subprime guys have moved into the FHA market and are bringing it down....they dont care ...they just search and distroy and move on

And kids....FHA does not credit score.....years ago(years)  the underwriter mada a decision based on the merit of the file..not that the minimun middle credit score has to be 640 and you have a 639...thus you do not get a loan

FHA needs to stay at 3% down....first time home owners need this BUT....BUT   make requirements for the loan broker harder to have a FHA license/certification...if we just made it a requirement that no one gets a FHA license if you have a felony conviction, this  would get rid of half the loan officers/brokers

You are absolutely right! This will make it a lot more difficult for home buyers and it will hurt housing recovery. I guess they are just trying to save their own skin. Nice pic by the way.

Ken:

I've yet to see ANYTHING from this administration that is good for the economy. I'm against the $8k tax credit and believe that we can't continue to offer these low interest rates. It just isn't healthy IMO...

Certainly credit score isn't a guarantee that people will stay in their homes, but the more "skin in the game" a person has the less likely they are to walk away without fighting for it. When their financial involvement is equivalent to first and last months rent...it's a bit easier to say, "Forget it!" I can't tell you the number of people I've spoken to about selling who don't have a mental attitude of "ownership". And that IS a problem!

This is an overreaction and a day late and a dollar short, but continuing down the same path isn't sustainable either. I understand your point. I really do. But what concerns me is the vast number of REALTOR(S) (and mortgage brokers) who believe they are entitled to sell homes as quickly and easily as giving away free money. We aren't guaranteed the right to have smooth sailing any more than people have a right to own a home without working hard and saving up for it.

You are from Georgia and know that FHA is a huge part of my business, but I'm all for people saving more money and being in a better position to purchase. If that means that my lifestyle isn't what it used to be: So be it -- it isn't about me and my needs. The sooner our profession gives that more than lip services the better we all will be.

Here we go...let's start with the obvious...I'm a broker and have been for a dozen years.  I've seen some changes in that time.  From tight underwriting to loose, and back to tight again.

Is it SO horrible to have to actually SAVE (gasp) money before you buy a home?  If you have skin in the game, you fight harder to keep your house when times get tough.  People I see don't want to be under-employed, so they don't work at all.  They bemoan the economy, and complain.  How about this....figure it out!  Work any job until you find a better one.

Owning a home is a privilege and a responsibilty, not a given right of adulthood.  Ask the older generations around...there was no PMI at all, and you needed to save (that dreaded word again) 20% to buy a home.

I do tons of FHA loans, and I would be impacted by the changes you've listed, but I haven't seen any even quasi-official suggestions about those guidelines, so I personally am far less than concerned at this point.

Ken, we need to have a thought process that is long term. If FHA continues to bleed they could bleed to death. Would we rather have FHA with tighter guidelines or no FHA at all?

Tighter guidelines are a natural response to underwriting that assumes every applicant could be the next foreclosure and every property will continue to depreciate.

Until our economy gets a grip on this, FHA and the mortgage world in general will continue to tighten guidelines. We cannot emerge without pain. It is that simple.

I don't like it either, but the best thing we can all do is urge our FHA clients to act as quickly as they can. Because things are going to get worse before they get better.

Certianly not good news, there seems to be a lack of consistency in poilicies at the Federal level.

Ken, Thanks for responding to my comment.  But I think you might have read more into it than was there. I made a rhetorical question and I didn't mean to infer that you have never put forth any good ideas.  I think Janet Guibault on commnet #38 might have said it better than I.

"If FHA continues to bleed they could bleed to death. Would we rather have FHA with tighter guidelines or no FHA at all?"

I know that if I were lending my own money, I would never lend at such terms as FHA has been.

Ken - I'm seeing the same affect on my pipeline, only I believe based on my targeted market of first time home buyers in the low-to-moderate income ranges, I believe these proposed changes, both those you reference and those that are still in comment stages at the Federal Reserve, will negatively impact closer to 50-75% of my pipeline. Janet weighs in on the other side of the coin with some great input, too. Is there an easy solution? No way. Are these proposals the best solution? I don't thing so.

Ken

It's things like this that require all of us, and our organizations such as the NAR, NAMB, etc to turn up the heat on our elected officials.

Ironically, most in government have never had a real job, and don't have a clue what it's like in the trenches.

Good post.

Ken - I never did leave a comment here after I re-blogged it, my apologies.  I usually try to remember to do that.  I just finished up quite a post over on my main site about all of this and also posted a bit of an intro on it here at ActiveRain.  My post got featured, so I owe you a bit of thanks for that as you were the inspiration behind it.

Keep bringing us great news on FHA Ken, I love it.

I read about this the other day. When will these changes be voted on? 90% of my Buyers are FHA, barely scraping up the 3.5% down and asking the Seller to pay closing costs. This will KILL Buyers in my market.

I think this is like the other side of the coin. After all this hype with Short sale, loan modifications, all this pressure for Lenders to lose money, do we really expect that there will not be a tougher lending ahead? 

It is also mostly affecting the very same people, that it was supposed to help.

Yes this is frustarting.  One hand doens't know what the other is doing. What is the purpose of the tax credits being offered to encourage buyers to buy if getting a mortgage is going to be even so much harder now?  Do we want the market to improve or do we want it to remain what it is?  

Very frustrating.  FHA, HUD and other government agencies are always so far behind the 8-ball... and it is scrarry that they are coming up with all these "new" rules, procedures and program.  Keep your fingers crossed and keep moving ahead is all we can do.  I love the devil look.

I am just out in the rain trying to make contact with my associates.  Have a blessed day!

We've seen a whirlwind of new rules in the past 11 months! These probably make sense economically for the country, but will devastate some who really want to buy a home. BTW, is there any doubt that our government is without a clue on many fronts?

Jim Gilbert, Sky Realty/Heart of Austin Homes

I believe the reduction in seller contributions will be a bigger hit than the rise to 2.25% MIP. The low down payment buyer does not have the money to cover their prepaids. They can roll the MIP into the loan with just a small rise in monthly payment.