New FHA Requirements?

By
Real Estate Sales Representative with Fieldstone Real Estate
I keep hearing mumbling within the real estate about these "new" requirements for FHA loans.  It may surprise you to know most of them aren't really new requirements at all; they're old.  It's just that now they are being enforced.
To understand what I am about to tell you, it's important that you recognize what an FHA loan is. On a basic level, it's a loan requiring very low down payments.  Since that makes it riskier for banks to do, the Federal Housing Administration insures the loan against default.  It works just like your homeowner or other type of insurance.  If the lending bank has a loss because of your default, they file a claim and according to the policy guidelines get reimbursed for all or part of the loss.
In the good old days, when the word foreclosure was rarely uttered, underwriters were waiving FHA requirements... allowing exceptions.  This happened often.  But, now that we're seeing short sales or foreclosures, both of which are a "default", on FHA loans, the banks are having to file claims so they can be reimbursed for losses on these loans.  It's happening enough that the FHA itself is suffering.
So the FHA, or others are their behalf, are conducting audits.  In the audits, they are scrutinizing the exceptions that underwriters have allowed, and they are not paying on many of the claims.  This results in banks telling underwriters they can not make exceptions on the requirements.... and so, old requirements are being enforced.
It's true what they say,  "There is nothing new under the sun." Time and time again I find this old adage holds true, especially in the real estate world. 
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If you would like personal advice regarding the purchase or sale of property in the Dulles area,
reach out to me directly:
Vicky Chrisner
703-669-3142
Please note that I can not provide insights regarding properties or real estate transactions outside of Virginia,
except to refer you to a professional in your area (which I am happy to do). 
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Topic:
Home Buying
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Virginia Loudoun County
Tags:
loudoun county real estate
new fha requirements
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Rainmaker
1,143,971
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

There are some new things under the sun actually.

While I agree with you on the fact FHA is still FHA, the bottom line is you used to be able to accept up to 3x30 lates on the mtg in the last year, now you cant (or should I say no one is interested in purchasing that loan) You used to be able to close loans down to a 500 score, now you cant (or should I say the same thing... no one is interested in buying those). You used to get monthly MIP for .55 now its 1.15%

Yes FHA may be mostly the same but its a whole new ball game out there today...

Jun 15, 2011 06:32 AM #1
Rainmaker
510,719
Jason E. Gordon
AmeriFirst Financial Inc, San Diego, CA - San Diego, CA
Sr. Loan Officer, CMPS, CDLP, CDRE, RCS-D, CDPE

Thanks Vicky...it's refreshing to hear this type of perspective from a Real Estate Agent. As a Mortgage Professional, I am constantly forced to deliver unpopular news to Borrowers & Agents who often wish to compare "the old days of underwriting" to now. Your description is valid on many counts.

Jun 15, 2011 06:42 AM #2
Rainmaker
108,703
Vicky Chrisner
Fieldstone Real Estate - Leesburg, VA

Thank you both for your comments. 

USA Mortgages - the fee has increased, yes... but the underwriting requirements for FHA are the same.  You are right that banks are putting an added layer of requirements because of the "marketability" of the loans, and that is true with all loans right now... but it's not because it is an FHA change.  Right now today I am dealing with a contract on a country property where I advised the buyers agent of some things when she told me the buyer wanted to change to an FHA loan - water test requirements, termite treatment for new construction - she assured me that none of these things would change from the original contract.  Guess what?  There are suddenly "new" FHA requirements... NOPE. Not new.  If they were, how would I have known of them?  They are old, and now we're all going to have to scramble to fulfill these requirements.  Buyer's responsibility or not, I have to get this deal closed. Ugh.

 

Jun 15, 2011 06:51 AM #3
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Rainmaker
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Vicky Chrisner

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