On Wednesday January 20, 2010, the Federal Housing Administration (FHA) announced that they would be coming out with more stringent lending requirements/higher borrower fees. The reason: to cushion against rising defaults and stave off a taxpayer bailout of the agency. There were a couple of key takeaways in the announcement, most notably:
•· Upfront Mortgage Insurance Premium: Currently, the UMIP (Upfront Mortgage Insurance Premium) on FHA loans is 1.75%. The US Department of HUD has announced that FHA will increase this fee by 50 bps; the new upfront mortgage insurance premium will be 2.25%. That will be effective with all loans submitted for an FHA case number beginning in April of 2010.
•· Reduce allowable seller concessions from 6% to 3%: This change will bring FHA into conformity with industry standards on seller concessions. The effective date is anticipated to be sometime in the beginning of the summer (TBD).
•· Increase enforcement on FHA lenders: The rules of engagement here are deep and thorough, however, they do not impact the borrowers directly; they have more of an indirect impact. Lenders will be under much more scrutiny, so, in turn, they will delve deeper into loans. They will require more documentation from borrowers and will look for more clarification for questionable items from borrowers, thus making the approval process a little more taxing.
•· What else is in store: There is a bill in the Senate proposing that the FHA minimum down payment be increased from its current 3.5% to 5%. However, this proposal may or may not get passed, so this is a down the road item.
So what are the takeaways for the borrower: As of today, there are none. These are April changes at the earliest, so now is the time to really take advantage of wider lending terms, affordable rates and home prices, and a tax credit to boot. Need assistance?
Call me today and lets work to get you in your new home while it's most beneficial to you.
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