Get out your permanent markers, HUD seeks public comment on three main issues for FHA loans

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

You can make a difference - you have 30 days to comment against FHA's proposals

you can make a difference with FHA loans

 

With a difficult economy and possibly some new FHA mortgage changes coming in the new future, this could be time to make your voice heard. HUD made this announce back in January 20th, 2010 - FHA announces policy changes to address risk and strengthen finances - I parlayed this announcement into layman's terms. - FHA loans and some possible mortgage changes.

 

So now, FHA just announced that there will be a 30 day period for comments on these issues described above.  These proposals are designed to limit the risk in regards to the Mutual Mortgage Insurance Fund and at the same time, trying to promote sustainable homeownership for FHA borrowers.

 

 

 

The 3 possible changes to FHA Loans :

FHA loans list of proposals

 

1. Changing the combination of credit scores and downpayments. You will need a credit score of 580 or above to still be eligible for the regular 3.5% downpayment. If below 580, you will be required to put 10% down. And FHA loans will not allow any loans with credit scores below 500.

My opinion :  I am not concerned with this proposal. Most lenders require credit scores of 620 or higher on FHA loans. I wrote about it here. - FHA home loans have no minimum credit scores - So FHA, you can have this one.

 

2. The reduction of seller concessions from 6% to 3%. Many of us know that this could have a huge impact on many different housing markets.

My opinion : I truly think this could affect those buying homes from $150,000 and below. Especially those homes prices at $100,000 and below. That would mean on a $100,000 home, the buyer could only get $3,000 of help towards closing costs. - FHA, since I gave you #1, I want #2, and keep it at 6%. Update... keep this in mind - If a borrower has to come up with more money now, what does that do to their cash reserves in many cases.  In troubled times, does this mean that they will default quicker now?

 

3. To tighten FHA underwriting standards for manually underwritten loans. FHA's purpose would be when using compensating factors while underwriting, lenders will be required to consider those factors which would be best predictive indicators of the performance of the loan.

My opinion : I guess I would have to wait for a better explanation letter in the mortgagee letter, if this is approved.  You already are required top have compensating factors when manually underwriting a FHA loan, making sure that the loan will perform. I just think this is FHA's way of saying that they want underwriters to be more critical when approving a loan and to have more solid compensating factors. Ex. Instead of making sure that your borrower had 2 months in reserves (money left over after closing to cover 2 mortgage payments), that they would like to see 6 months. Who really knows on this one. Could be more political chit chat.

 

 

 

Conclusion : As I mentioned above, I am not worried about numbers 1 and 3. But number 2 could have an impact on the housing market in many areas. On the positive side of things, HUD could have increased the down payment to 5%. This was talked about in congress several times, but shot down. Talk of FHA loans raising the down payment to 5%. -  Here is the argument about why some want more money down. The FHA argument - I want more skin in the game.

 

 

Where and how to comment :

Regulations.gov - (main site) please to search for government proposals.I give the specific page below, where to comment.

 

Here is the link to the different proposals and FHA's reasoning's for such proposals. Federal Register for HUD changes and the reasons why. If you go to the middle of the first page, you will see how they explain the different ways to comment. They highly suggest doing it electronically, which I mention below.

 

 

CALL to ACTION : Send this to other agents and loan officers.  Don't hesitate to reblog this, to get the message out.

 

Here is the actual page to go and make your comments - Comments for reduction of seller concessions and new loan to value with credit scores - Click submit a comment which is on the right side of this page, in blue.

 

 

 

Important Update as of 7/17/10 @ 1:05 pm - Please read and make your voice heard - If you are going to comment to FHA, please copy and paste this link into your comment :  http://activerain.com/blogsview/1749213/issues-regarding-the-3-seller-help-proposal-by-fha-can-we-fight-fha-loans-with-solutions-yes-   (this article is below)

Issues regarding the 3% seller help proposal by FHA - Can we fight FHA Loans with solutions?? - YES !!!

 

 

 

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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!

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

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Experience & Knowledge at its BEST !!!

 

 

Follow me on:

Mortgage Myth Busters

 

______________________________________________________________________________________________________________

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!

HUD

 

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

 

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

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Re-Blogged 38 times:

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  1. Gabe Sanders 07/16/2010 12:40 AM
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  6. Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional 07/16/2010 07:18 AM
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  28. LINDA SABO 07/17/2010 09:16 AM
  29. MyAgent My Agent 07/17/2010 10:17 AM
  30. Lanre-"THE REAL ESTATE FARMER" Folayan 07/17/2010 11:44 AM
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  32. June Piper-Brandon 07/17/2010 02:04 PM
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Anonymous
Lora Hubbel

Thanks for the post - but seller concessions are alreay 3% limit in South Dakota and its working fine. HOWEVER HUD discriminates against homeowners on their repo houses. We have some great HUD homes that only investors can buy - even though owner occupants gets first dibs - they never get the house because of catch 22 policies of HUD. I have sold 2 to owner occupants and I lost money because of all the constraints...they were friends whom I was helping so I rationalized the work. A co-worker says he has sold 19 HUD homes....all to investors and says its impossible to sll to owner occupants. I am thinking of suing HUD.....

Jul 18, 2010 12:29 AM #72
Rainmaker
166,473
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

Great summary of what's going on.

Jul 18, 2010 01:32 AM #73
Rainer
9,308
Tom Ladd
Premier Realty Group - Syracuse, NY

I don't have a problem with #1.  People should show some financial responsibility before they buy a house and if they haven't, then they need to put more of their own money at risk.  I would not want the minimum dp raised to 5%.  I don't think that the additional 1.5% would keep more loans from going bad, but I do think that you may reduce the number of people buying a home a bit.

Reducing seller concessions would be difficult in my market, since we have an average sales price is $126,000.  With taxes = to 3.5% of the property values, the 3% would barely cover the amount collected for the escrow account.

I don't think I would have a problem with #3, but I would need more information.

Ultimately, homeownership is great for our country and it fuels the economy.  In these hard times, you have a lot of good people out there who deserve to own a home.  Common sense underwriting is all we really need.  If someone has a steady job, decent income, and good credit, they should get the opportunity to own a home.  We shouldn't demand that they have $15,000 - $20,000, before they buy a home, unless you want to completely stifle the housing market.

Jul 18, 2010 01:49 AM #74
Ambassador
701,314
Lee & Pamela St. Peter
Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522 - Raleigh, NC
Making Connections to Success in Real Estate

Thanks Jeff for keeping us updated.  Well written call to action!

Jul 18, 2010 02:46 AM #75
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

BOB... comment #65... . thanks for the comment and for stopping by... I think many would agree.. thanks

JUNE... . well, the gov't has been very good lately in stepping in when they don't belong or have no idea. But this is FHA that is wanting to change this. But who knows if there is pressure coming from the gov't.  thanks

WOODY... . my pleasure and thank you for your support. Question, where is your local area?  thanks

LISA... .

BRIAN.. comment #70. . no, thank you and my pleasure.  Just make your voice heard.

 

ROBERT... . I know this was first brought up back in January.  Here is HUD's comment. - FHA Announces Policy Changes to Address Risk and Strengthen Finances - I wrote about it here - Important changes about FHA loans -

Now, I know you value your one source, but if HUD was pursuing the changes in monthly mortgage insurance, wouldn't you have thought they would have mentioned it in their new press release that was just mentioned. - FHA announces policy changes to address risk and strengthen finances - I will try calling a friend of mine who is close to HUD and see if I can find out from him... thanks and thanks for coming back to add to this conversation.

 

Jul 18, 2010 06:15 AM #76
Rainer
53,974
Lee Robinson
Highlands Residential Mortgage - Rogers, AR
Close on Time All the Time

Good points.  You right on about the impact of reduction of seller concessions on smaller loans.  It will result in more cash from the borrower or higher interest rate, so the lender can pay some of the costs.

Jul 18, 2010 06:19 AM #77
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

LORA... . I didn't know this... so is this a law in South Dakota, that supersedes any lending guidelines? In regards to your comments about HUD repos and such, I am not familiar with it. It is interesting though, Please keep me posted on the situation.  thanks

TINA.. . thank you very much and for stopping by.

 

TOM... . I really don't think anyone should have an issue with #1. There was a realtor or two that thought differently. Not sure why, but hey, we all have opinions, right? And no, I don't think an extra 1.5% down would limit foreclosures and such. I wrote about it here. - FHA laons to 5% down??  -  Followed by this post.. - I want your skin in the game. Give it up !!  -

Yes, reducing the seller help to 3%, as many have stated, would hurt many markets. As far as #3, they talk about the underwriting guidelines here. - Federal Register for HUD changes and the reasons why. - They want underwriters to address more issues when doing a manual underwrite. And yes, it should come down to common sense underwriting and that you shouldn't need 10% to 20% down.  thanks for your input and feedback.

 

LEE & PAMELA..comment # 75.. . my pleasure and thank you very much for the kind words.

LEE...comment # 77... . I think many of us do agree with this. And correct, it could result in higher interest rates to the borrower, so the lender could pay some of the costs. It has to come some where.  thanks and thanks for the compliment.

 

Jul 18, 2010 06:20 AM #78
Rainmaker
354,933
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

Jeff, I followed your blog back from Missy.  I am concerned about #2 also.  There are not many people who have the 3.5 required downpayment and an additional 2-3 percent for closing costs. 

Jul 18, 2010 06:39 AM #79
Rainmaker
1,431,531
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I think they ought to loan to people that prove they can pay (like they used to).  If your mortgage is equal to or less than a rent payment you have been making you should be good for it.

Jul 18, 2010 01:15 PM #80
Rainer
38,518
Wanda Promes
Sioux Falls, SD
Mortgage Loan Originator

Jeff,  

I agree with you on #1.. Minimum credit score. There is already a standard out there with investors.  This will not change anything.

#2-  minimum downpayment. In most cases, we are unable to use up the 3% concessions. I could see where this could impact homes purchased at 100k and below in a negative way.  A 100k home would carry approximately $2.078 in closing costs (that includes origination, UW, credit report, flood cert, and appraisal and survey).   Prepaids may cost an additional $1,565 (this includes property tax reserves based on 6 months at $1500 per year, a year insurance premium and insurance reserves and 15 days interest). We have title charges (or title opinion, abstract, depending on the state) of 1/2 of the transaction. In our state this would add up to approx $438.  Additionally depending on the transaction, there may be inspection costs and warranty that may be added on, radon mitigation, termite treatment, ect. These costs could add on average another $850, conservatively. We now are up to a total cost of $4,931.00.   The borrower is required to invest 3.5% of their own funds which is $3,500 for this transaction and the seller would be contributing $3,000.  3.5% is also the downpayment, this takes care of the required borrower's mandatory investment from FHA.  This leaves $1,900 of the closing costs and prepaids left over after sellers contributions are subtracted for the borrower to come up with out of pocket. under today's rules it would be covered with the up to 6% sellers contribution.

#3- disagree.   Manually underwritten loans are already being played "safe" by underwriters. I see underwriters today playing more on the safe side with all the mortgage scrutiny going on. This is not always bad, but when most things are left up to interpretation, sometimes a borrowers circumstances that were out of their control overrule a conservative underwriter who would prefer to keep his job secure than underwrite to the rules and "interpret" correctly. I have seen this happen with borrowers that should have had loans but are not getting them because an underwriter will not 'count" compensating factors.

And to Lora's comment, how sad is this?  VERY SAD.   It is tough to purchase those HUD repo homes. HUD is not helping the dream of ownership when they are selling their homes to investors that simply profit from that sale by flipping the home at a higher price to the consumer.

Jul 19, 2010 02:44 AM #81
Rainmaker
468,350
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

The issue that is most important for my area is the inability to get any more spot approvals.  This is a big problem in an area where up until the last 2 years there were bery few FHA loans.

Marcy

Jul 19, 2010 05:22 AM #82
Anonymous
Virginia

In response to post #70 I think this might help with were the idea of the MIP being increased from .55% to .85%...I found a bit of information... (this is not written by me)

...HUD is seeking congressional authority to raise annual mortgage insurance premiums from .55% of the loan amount per year to .85% (or .9% if the down payment is less than 5%). This request is outlined on page 346 of the budget’s analytical perspectives. On a median transaction[1] in Minneapolis, Minnesota, this translates to 35.64 dollars per month. This may not seem like much but it means that if this same family were approved for this sample purchase with a sales price of $123,850 with the current premium costs, they’d lose $5,910 in purchasing power under the new premium costs. Any reasonable person would conclude that this will apply downward pressure on home values and downward pressure on home ownership in the affordable housing sector... (WRITTEN BY: Charles Dailey)

Oreginal post link: http://activerain.com/blogsview/1482581/fha-annual-mip-increase-and-reduction-in-seller-paid-closing-costs-a-letter-to-congress

Copy and paste to read Mr. Dailey's post.

My oppinion, I think what is happening not only within the mortage and real estate industries but with in the whole "government trying to save America" is going way to far.  I am not sure why common sense just can not be used when it comes to running our country.  Anyway, I better stop here... ;) I could probably go on and on and on and on...  Thank for the insite!

Virginia

Jul 19, 2010 05:56 AM #83
Rainer
1,906
Kari Garza
MyHouseDeals.com - Houston, TX

I like the information you're giving out. Your examples are excellent and written in a way that someone not familiar with real estate terms can understand. Very interesting reads!

Jul 19, 2010 07:22 AM #85
Rainer
432,184
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

Thank you for the call to action. Margaret C

Jul 19, 2010 12:34 PM #86
Rainmaker
323,215
Fred Cope
Reliant Realty in Nashville, TN - Nashville, TN
Looking For Homes With A Smile

FHA was established to help low-middle income citizens achieve the American dream.  The proposed changes do nothing to accomplish that, and will further limit citizens' ability to buy homes.  Requiring more down-payment and reducing the sellers' abilities to make a deal work will further erode home values, homeowners ability to prosper in the sale of their homes, and further reduce the traction needed to get this great economic engine moving up hill.

Twenty-five years as a mortgage loan office convinces me that these moves are absolutely in the wrong direction.  Housing default have more to do with foolish and greedy politicians than with struggling and financially-strapped home owners.

When the goverment gets out of the way, we will grow.  Inthe meantime, we have to struggle to overcome (1) a depressed housing market, (2) cash-strapped & credit-challenged consumers, (3) a screwed up appraisal system, and (4) over-paid beuracrats that don't know hard times because the have over-blown benefits provided by tax dollars extracted from the same cash-strapped consumers they claim to be looking-out for.

Be of good cheer...election day draws near!!!  Let us VOTE!!!

 

Jul 19, 2010 06:40 PM #87
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

BRIAN... comment # 46 & 70 ...  Not sure what you found out from your person, but Gerry Suarez sent this to me the other day...

The bill authorizing HUD to raise the MIP is stuck in the Senate but the change is still coming. Scroll down to the "restructuring FHA PMI" section about 1/3rd down the page. http://portal.hud.gov/portal/page/portal/HUD/press/testimonies/2010/2010-03-11c

thanks


DAMON... comment # 79 .... that is one reason why I like reblogging.  In any case, yes, it would leave many new buyers with the burned of coming up with more cash. I know some people want more skin in the game, but that is not what keeps a house from going into foreclosure...  thanks

GENE... .  well, that is common sense underwriting and we do that.  But in regards to your example, you still need a credit score and to qualify with income ratios, besides having the money... thanks

WANDA.... . did you go to the part to where HUD talks about manual underwriting?  Here is the link. -Federal Register for HUD changes and the reasons why.  -  They get in more detail and it wasn't actually what I first thought about.  Overall, we do need to voice our opinions especially on # 2.  And in regards to Lora's comment, comment # 72, this is sad... thanks for your input and feedback.

MARCY.... . is this because many of the lenders in your area won't do the full condo complex approvals now?  I know it's a little more work, but I think many lenders either don't know how, or just want someone else to approve the complex and then jump in.  Just my opinion... I will ask around to my lending friends.  thanks

VIRGINIA.... .  thanks for the information, but what Mr. Daly posted was back from February 2010.  If you read my 2nd link in my post, FHA loans and some possible mortgage changes, I had already talked about this in January when it first came out.  If you read their current proposals as I linked in the 3rd link, it's not stated.  If you read my comment to Brian, 5 members above you, you can see that I left a current link in there explaining the same. It basically still needs to be voted by the Senate.  Not sure what they are waiting on, but it is still in limbo.  thanks for your research and such.

KARISSA.... .  my pleasure, I am glad that I could help.  And thanks for the polite compliments.

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

FRED.... .  that is exactly why FHA was started... and it has worked.  Everything that you stated is so true and on the money.  Please don't even get me started on all of that.  ;o)   I wrote this one about a year ago. -  Call to Action - We must fix the real estate market ourselves !!! -  The gov't needs to stop trying to fix things on their own assumptions and listen to those of us that have been in the trenches for years.  Overall... thanks for your strong input and feedback. thanks



Jul 20, 2010 03:16 AM #88
Rainmaker
560,079
Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team
Ken's Home Team LLC. - Vancouver, WA
- SOLD IS OUR FAVORITE 4 LETTER WORD -

Great Post Thank you for this infomration.  I appreciate it. 

Jul 21, 2010 06:21 AM #89
Rainmaker
323,215
Fred Cope
Reliant Realty in Nashville, TN - Nashville, TN
Looking For Homes With A Smile

Hello Jeff, and thank you for your kind words regarding my previous comments (#87).  You asked if I was following the comments: yes I am, and some of the remarks suggest there are REALTORS® in this discussion (and they have every right) who only know one thing about FHA--how to spell it.  Twenty-five years as an FHA/VA mortgage loan officer has led me to disagree strenously with those who think the borrower is the problem and needs a lobotomy.  God help us!

FHA is the backbone of the national housing market.  If someone thinks the FHA applicant needs to put at least 5% or 10% down, then by inference I, as a veteran am a deadbeat for not having to make a down-payment.  Friends, the size of the down-payment has very little to do with the likelihood of foreclosure.  A greater percentage of well-to-do 20% down buyers have over-extended themselves and ended up in foreclosure.  It was NOT the FHA applicants who diclosed "imaginary" income on their application.  It was NOT the FHA applicants who claimed "mystical" assets on those applications.  And it was NOT the FHA applicants with sub 600 scores that were able to by-pass reasonable underwriting guideline because they had high FICO scores.  So lets get this strait: it was the hoity-toity crowd that allowed greed and arrogance to take pieces of the cake (their eyes, and egos being bigger than their stomachs/wallets.  It was the power-hungry democrat leadership in Congress [Barney Frank and Chuck Todd] that refused to allow the Bush Department of Justice to investigate Fannie Mae and Freddie Mac.

Joe American didn't make this mess; but God knows he is the one who will have to pay for it, and he is the one who will bail us out.  I proudly stand with the common FHA borrower/homebuyer, and prayfor those who don't want to soil their hands (minds) with FHA loans.  FHA is not a communicable disease, it it is the premiere loan of America.

Jul 22, 2010 12:12 PM #90
Rainer
45,359
Dennis Erickson
Berkshire Hathaway Home Services Montana Properties - Bozeman, MT
My Best..., Always!

Item #2 should go to FHA.  There does need to be more "skin in the game."  If borrowers are allowed to hold back funds they will spend the money.  It's historically provable.  Now, if the borrowers agree to put an amount in a CD for a year or other retirement account, then items 2 and 3 could go away completely.   Equally important to the equation, in my opinion, is the ability for the seller and borrower to negotiate freely on seller financing.  The current banking legislation discussion has included a debate about whether to eliminate seller financing options altogether, thus putting institutional lenders in complete control of the lending of money for real estate transactions.  That would be crinimal and quite possibly unconstitutional. 

Jul 23, 2010 05:48 AM #91
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

I waited til the end, but here is my comment to HUD. Comment Tracking Number: 80b2d256 

 

Aug 10, 2010 06:22 AM #92
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