Don't allow the seller concessions drop to only 3%

Home Builder with 180 Degree Floors

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

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 : - (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 :   (this article is below)

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

Posted by

Ronell D. Moore

Small Business Consultant



Comments (3)

Carol West
Carol West Real Estate, LLC - Hillsboro, OR
Real Estate Agent, Hillsboro, Beaverton, Portland


Thanks so much for a good posting on a subject we all need to comment on. I agree with your assessment on the 6% seller concessions.

Jul 20, 2010 08:46 AM
Ronell Moore
180 Degree Floors - Nashville, TN
Transforming your Flooring into a work of Art.
John Thomas
E3 Green HOMES - Boulder, CO
EcoBroker, MSEE, MBA

I guess I am somewhat indifferent on the concession issue. I don't know how our industry fell into the 'expectation' of a 6% reduction under the guise of seller concession which in my view is just another word for discount. Why shouldn't buyers have to bear the full expense of their loan costs? After all, it is their loan! I suppose if there is room to increase the selling price by that amount then it is more fair for the seller, but it doesn't always work out that way.

Jul 20, 2010 08:52 AM