New FHA loans MORTGAGEE LETTER & Explanations about Credit Scores - Make Your VOICE Heard

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Important Blog Today – FHA loans & HUD’s changes - You can make your voice heard. Please read further..


fha loans & fha mortgages


So much has transpired in the last week with FHA loans and there are things that you need to know and understand why some of these changes took place.

Last week HUD put out their policy changes and what could take place in the near future. FHA loan changes go from fact to fiction. The next day, they put out the official HUD mortgagee letter, ML 2010-02.

Overall, I have noticed several comments that either the commentor seemed confused about the changes or believed that the changes would be no good and or destroy home buying. Which will lead me into my next blog tomorrow. We must ABOLISH FHA loans. (please stop by tomorrow for any eye opener)




Some important FHA changes -


What were the FHA loan changes by HUD? Please read : FHA loan rumors become a reality. Keep in mind, the only change that is official is # 1. The other specified changes will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.


1. Raising the FHA UPMIP (upfront mortgage insurance premium) - So many keep saying that this is an added expense to borrowers at closing. Yes & No. This statement is misleading, even though it appears on the HUD settlement statement. In reality, you are allowed to finance this upfront mortgage insurance into the loan. The new change was only 50 basis points, going from 1.75% to 2.25%. This change will go into effect on or after April 5th, 2010, with all new FHA case numbers assigned.


Example on the difference :

On a $300,000 loan, you are talking about an additional $1,500 added onto the loan. This equates to an additional $8 per month. That is not much to disqualify someone, unless you were already exceeding the debt-to-income ratios already.


Why was this change made?  To help re-establish FHA's capital reserves. David Stevens gives an explanation to some of this in FHA changes.  Just a FYI - David has just recently joined us at Active Rain and was appointed the Assistant Secretary of Housing in early 2009. I wanted to share my thoughts because some of my views slightly differ from what Mr. Stevens wrote in his blog post.



2. FHA credit score changes & down payment updates - With all FHA loans, you still don't need a credit score. Keep in mind most lenders and investors have what are called lender overlays.  The lender can add to the FHA guidelines. Why would a lender do this?  To make it more sellable to other investors on Wall Street.

This is a change that is not really a huge change. You must now have a credit score of 580 or above in order to be allowed to use the regular 3.5% down payment guideline. Any score below this, the borrower will need at least 10% down. Why is this not such a huge concern? Most lenders are at 620 and several are at 640. The reason being is that most investors on Wall Street don't want to purchase loans less than a 620, because more loans under this score don't perform as well.

Credit scores under 620 - Yes, there are a few investors that allow for scores under 620, but BUYER BEWARE. Just because a loan officer has this program, doesn't mean that it will happen. On top of that, most lenders have major penalties if you fall under the 620 score. These penalties are anywhere from a 1/2% in rate to up to 2 additional points in fees, and sometimes both. Why?  Because that lender will portfolio that loan, hoping that they can sell it in 12 months. The additional points and higher rate is to help with their risk, for those loans that don't perform. 

My opinion on this?  Work with a trusted loan officer that is not pushing the lower credit score. Work with a loan officer that will help you get your credit scores up in 6 months to a year. So what you missed the first time homebuyers tax credit. Because of the difference in fees and rate, it will cost you more money over the longer period than if you just waited and worked on your credit.



3. FHA seller concessions from 6% to 3% in seller help - Mr. Stevens stated this in his blog, FHA changes. "The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.  This change will bring FHA into conformity with industry standards on seller concessions."

Hey, I love making loans, but I will have to agree with HUD's assessment here. Now, I will say this though. It will hurt many markets across the U.S. Especially those families that are middle to lower income and those buying homes that are priced at $160,000 or lower, especially those at $90,000 and less.



Overall, we can have that whole argument that you need skin in the game, etc, etc. On all FHA loans, the borrower still needs 3.5% of their own money into the transaction. Sure, you can get a gift from family members, or even grants, and or even money from non-profit organizations. But the outcome in my opinion, could dampen the housing recovery even more. And that is why you can voice your concerns and add comments to the Federal Registry. FYI - I will be posting a powerful blog tomorrow on Abolishing FHA loans overall. Please stay tuned.




Make your VOICE heard in February 2010



The Federal Register


PS.. - Reminder - I will post a new blog when these changes become public on the Federal Registry, allowing everyone to voice their opinions. Here is when you can stand up and be officially heard. YOUR VOICE.





Okay.. it's been stated and written....

We need to ABOLISH FHA Loans!!!!




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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!



For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors


Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Bridget Cella 01/25/2010 04:04 AM
  2. Mark Watterson 01/25/2010 11:59 AM
  3. Connie Harvey 07/15/2010 07:45 AM
Lending / Financial
Florida Palm Beach County Wellington
1st Time Buyers
All About Mortgages/Mortgage Networking
The FHA Mortgage Group
fha mortgagee letter
fha loans
fha mortgages
fha credit scores
federal registry
fha mortgages new jersey
fha loans florida
fha md

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Show All Comments
Pippa Mac
Chevaux Group Realtor, The Woodlands and Spring - The Woodlands, TX
The Woodlands TX Real Estate

Thanks Jeff for all the information.  Definitely what a Real Estate Professional needs to know to help keep clients informed!  pippa

Jan 25, 2010 04:59 AM #17
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Jeff: Thanks for the update-I appreciate it. I for one do not believe FHA loans will be abolished. I remember when we bought our first home in 1993. FHA wasn't available then for what we needed to borrow but the program was alive and well. It just goes to show you FHA has been around for a while. I expect it to continue. After all, what would the Jeff Belongers of the world do without FHA? Lol! Take care.

Jan 25, 2010 05:17 AM #18
Mike Kennedy

FHA needs to do what it has to do to stay solvent.  Most of these changes will not hamper lending that much in my opinion.

Jan 25, 2010 05:41 AM #19
Paul Warkow
Paul Warkow-D.G. Weber Law Associates - Hauppauge, NY

There are lenders out there that keep sending me e-mails that they will lend to borrowers with below 620 scores.  Every time I send them files, they find a reason to say "No" even with low LTV and DTI.  To me the bottom line is that nobody is really doing FHA loans with sub 620 scores so the 10% down on 580 scores is a non-issue.

Jan 25, 2010 05:49 AM #20
Mark Towler
Southeast Mortgage - Atlanta, GA

In my opinion lowering seller concessions will be the most hurtful part of the new guidelines. The first time buyer who is buying a home under $150k does not have enough money to cover their prepaids. On the other hand, we need HUD to get FHA back up to the proper reserve levels. FHA will never go away...but I would not be surprised if in January of 2011 we have a 5% down payment for FHA. We shall see. 

Jan 25, 2010 06:03 AM #21
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX


If you're saying I'm old school, you're right and proud of it!

As I said run the numbers! Give the consumer a factual basses to make a derision. Explain the facts in light of the client's reality not generalities!

We're not that far apart.


Jan 25, 2010 07:11 AM #22
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


GREGORY.... .  when you say that we got "hoodwinked", I am sure you are referring to last years bailout of some larger banks... and in regards to Fannie Mae...  well, non of that money went to FHA's fund reserves. I will be talking about some of this tomorrow. Where I fault HUD is not having a huge concern a year ago, when the writing was in the wall... that they waited until now. At least with the UPMIP... something that I will talk about tomorrow also. PS.. you said at the end... we can kick, scream, and make suggestions all day long... but good luck with it. Well, I believe if we bend the right ears and hard enough, that we can possibly make a change. I don't kick and scream, I make educated and common sense suggestions. Not saying you said that, but just clarifying... I will say this... that we will see the housing market slow more, if the 3% becomes a reality in the smaller markets.  thanks for your feedback.


CARI... .  I am really not concerned if investors will embrace the 10% down under 580. That is a very small fraction of any market. Besides, I just don't see it happening, because of the risk with the credit score analysis..  Maybe if it went to 600 with 10% down. But again, this should not be our main focal point.  You had also made this statement... "It would truly be a sub-prime niche with FHA insurance."

I don't like using the word subprime with FHA... too many loan officers and lenders thought FHA as their subprime savior when subprime basically disappeared... and this hurt us some and is hurting us now. I will explain later... thanks for the comment..


PIPPA..... . my pleasure, I am glad I could help some... and thanks for stopping by.

PAUL M. ... . in regards to FHA loans being abolished.. I am not going to say a thing... just stop by tomorrow to read my post on it.. ;o)  I will make some points on all of this and just for the fact that HUD has been around since 1934. But I don't want to give too much away.  thanks

MIKE.... .  I agree 110%... because we will need FHA in order to turn the corner. I do think that the 3% seller help will hurt some markets though.   We all just need to come together with some solutions to coincide with this change.., it's out there... thanks

PAUL W. ... . well, that was mostly my point, that they are extremely hard to do,under 620. But, that is absolutely not true though, because there are some lenders doing below 620 and they are being closed... but it's a lot more detailed than just saying that .. hey, I have a 599 and that lender can do 599 scores. It then becomes a challenge, because of more criteria that needs to be met... and that many loans officers that can do these credit scores, don't explain this correctly, making it seem easy to the home buyer. I know this personally, because a few clients and I trapped a few loan officers in what they were saying... and then to see them wiggle their way out... it's just sad when the average loan officer can't be transparent on this topic of credit scores... thanks

MARK... . I don't think you and I are the only ones that feel this way.  :o)  Seriously... it will become a much heated topic as the weeks go on,especially when leading up to the new change date. We all must comment on the registry to have our voices hear, but within reason... thanks


Jan 25, 2010 08:04 AM #23
Jay-Paul Lowry
Riverside, CA

Jeff - great post and you are correct only one of the "changes" has gone into effect.



Jan 25, 2010 10:47 AM #24
Karen Pannell
Real Living / Home Realty - Owensboro, KY
Owensboro KY Real Estate -270-903-2167 Homes, Cond
Thanks for keeping is in the loop.
Jan 25, 2010 11:49 AM #25
Mark Watterson
Salt Lake City, UT
Utah Real Estate

More good stuff.  Well written and re-blog material.

I think FHA is a great program (as long as it self sustaining) even if they have to raise the UPMIP. 

Jan 25, 2010 11:59 AM #26
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

FHA is the only game in town for most people these days, and I can sell whatever they do to assure they can stay "in business" - as I'm sure you can and will, notwithstanding the title of your blog post tomorrow.

Jan 25, 2010 12:34 PM #27
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

I don't know, if I had to take a stab in the dark, I'd think the 6% concessions will stay. I know its all up for debate, etc. I rarely use more than 3%, BUT those that need more are the buyers of lower priced homes, and I don't know, that seems unfair to the lower income buyer - Certainly something FHA would not be looking to do. 

Jan 25, 2010 12:59 PM #28
Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs

Thanks for the update! I sell a lot of condos, most of the complexes where people want to be are not currently approved. Have you done the work to get any approved. Is there an avenue to get this done. Who does it?

Jan 25, 2010 01:27 PM #29
Todd & Devona Garrigus
Garrigus Real Estate - Beaumont, CA
Broker / REALTORS®

Great blogs. Thank you. I enjoyed reading them!

Jan 25, 2010 01:31 PM #30
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


WILLIAM... . comment # 22.... .  you old?  nah... besides, I couldn't tell.. ;o)  Seriously, I know what you are saying and you should know that I do run those numbers.. and give the facts. But we do need to keep preaching this, because even some of those trusted loan officers that get referrals from realtors, don't fully do their job correctly. Sure, they closed the loan with no hiccup. Sure, it seemed like a reasonable rate with decent fees. But wait, that same loan officer didn't take the time to explain how an adjustable rate works?  But sold that loan to your client, because they liked the lower rate?  I have a problem with this... see, now you got me started.. lol

JP.... . thanks for the polite compliment. It will be interesting to see what happens when the comments start to come pouring into the registry. Time will tell..

KAREN.... . my pleasure and thanks for stopping by.

MARK... . I think FHA is an excellent program and I will be talking about this in my post for tomorrow titled, "Abolish FHA loans now"...  Overall, thanks for the kind words and for reblogging this.

MARGARET...  comment # 27... . I will agree... it is up to 35% to 40% of market share in the last year... up from like 15% from 5 years ago. This is huge... in regards to the title of my blog post tomorrow?  Well, just stop by for a sneak preview.  Don't judge me or assume just by my title..  ;o)  Time will tell... thanks

STEVE..... . I am not sure about the 6% seller concessions staying. HUD seems very firm on this, just as they were in their decision on killing seller-funded DPA programs. Both Donovan and Stevens seem set on this... I do wish they would reconsider the smaller markets though.. those markets that support lower incomes and or lower valued homes. But I guess time will tell. We at least agree on your last statement, that this change alone will be unfair to the lower income buyer.  thanks for your input as usual.

ERIC... . yes I have and it's not that hard. You just need a good lender/loan officer that is will to do the leg work to get those condo associations approved. It has to be done by the lender themselves...  thanks

TODD & DEVONA.... . comment # 30... . thank you very much for the kind words and for the polite compliments... much appreciative... thanks


Jan 25, 2010 01:48 PM #31
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

This is very important to know when working with buyers to let them know about timing, the impact as far as cost, etc.

Jan 25, 2010 02:22 PM #32
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

I'm gonna have to bookmark this for future reference. It's more than I can take in right now! This is gonna require some focus.

Jan 25, 2010 03:56 PM #33
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


CHRIS.... . it's extremely important... I had one realtor actually tell me on a reblog, why even bring these changes up now... lol  Rut Row... I will be writing about that.. thanks

LISA..... . bookmark it all you want and come back for some night reading prior to sleeping...  ;o)  It should definitely put you to sleep... lol


Jan 26, 2010 12:10 AM #34
Gerry Suarez Jr.
Jet Home Loans NMLS 1660135 - Maitland, FL
FL Mortgage Guru

Another great post Jeff and too many comments to read through them all. I'm going to stick with my position on the seller contribution proposal though, especially with FHA recently adopting (reiterating in their words) HVCC like appraisal procedures. HUD is pushing the reduction in seller contributions to combat pressure to inflate appraisals. Shouldn't we wait to see if the appraisal changes work first?

In my market the reduction in seller contributions will mean more $ needed by buyers. Our loan amount are too low and closing costs too high. All we will be doing is forcing buyers to close with less cash reserves, and that isn't going to help anyone.

Great debate going though- thanks for putting this out there Jeff.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Jan 26, 2010 12:19 AM #35
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


Okay.. it's been stated and written....

We need to ABOLISH FHA Loans!!!!

Jan 26, 2010 02:49 AM #36
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