FHA Streamlined Refinance- the time to act is now

Mortgage and Lending with First Colorado Lending

Deep inside all of the information concerning the Federal Housing Administration lately, there is one underreported tidbit we want to point out. For those of you who currently have FHA-backed home loans and are looking into a streamlined refinance, the time to act is now. And here's why.

In its 2012 annual report, the U.S. Department of Housing and Urban Development announced it will reverse the original plan to cancel the mortgage insurance program for FHA loans, effective “sometime in 2013.” The effective date is dependent on when the loan is endorsed by HUD.

With the FHA short on insurance funds, it has to take measures to protect this program. Yes, we can expect that insurance premiums will increase soon, both upfront and annually. The FHA believes this will strengthen its capital position but not limit access to credit for qualified borrowers. But after a certain amount of time, the borrowers no longer need to pay insurance premiums, even though FHA-backing remains in force for the life of the loan.

That's going to end soon.

"While FHA’s 100% insurance guarantee remained in effect for the 30-year life of a loan, borrowers were only required to pay premiums for less than ten years," HUD said in a statement. "FHA has been left without premiums to cover losses on loans held beyond the period for which it collects premiums. This change will apply to new loans." Currently, once the principal balance on your loan reaches 78% and you have made a minimum of 60 payments, you are free from paying the premium.

New homebuyers who plan on using FHA for financing should expect to still see the insurance payments remain due on the loan until the house is sold or can be refinanced into a conventional mortgage. FHA Acting Commissioner Carol Galante addressed the changes, saying, “We will continue to take aggressive steps to protect FHA’s financial health while ensuring that FHA continues to perform its historic role of providing access to homeownership for underserved communities and supporting the housing market during tough economic times.” Source: HousingWire

Owners can take steps to avoid having their home appraised at a lower value than the asking price. “Taking the time to understand the areas that can positively influence your appraisal can help ward off the chances that your home will be appraised at a lower value than the asking price,” according to a recent article at Realty Times, which highlights ways sellers can prepare for an appraisal. Here are a few ways that home owners can hurt their appraisal, according to the piece.

Leaving the home untidy. Having an unkept exterior or interior can cause an appraiser to decrease the value somewhat. Remind your sellers that curb appeal is also important for an appraisal. Overgrown bushes or an unkept home exterior could prompt an appraiser to take as much as 3 percent off the value, according to a CNNMoney article.

  • Having incomplete remodeling projects. Don’t let home owners keep a remodeling project unfinished prior to an appraisal. If they must, make sure they include details of the complete project and when it is to be finished to the appraiser.
  • Failing to list improvements or upgrades made to the home. Compile a list of upgrades and home improvements made to the home and provide it to the appraiser. While some items, like a new roof, may not help raise the appraised value, other items might. Source: Realty Times

New homes have been found to burn much faster than older homes due to a change in building materials the last decade. The increased use of prefabricated, lightweight construction materials in new-homes today has caused homes to burn and collapse faster than homes that use traditional solid-wood frame construction, firefighters and fire safety groups say.

Yet, California and Maryland remain the only two states that require sprinklers to be installed in new homes. On the other hand, several state governments have enacted legislation in recent months forbidding cities from requiring sprinklers to be added to new homes.

Several state governments have become outspoken critics against sprinkler systems added to new homes despite the move by the International Code Council, which develops national building codes, in 2009 voting in favor of fire sprinklers being added to all new one- and two-family homes. When the housing market started to soften, however, many lawmakers, lobbyists, and the building industry started to speak out against the installation of sprinklers in new homes.

"When you start mandating a fire sprinkler system, you are going to price a lot of people out of these new homes," Ned Munoz, vice president of regulatory affairs for the Texas Association of Home Builders, told Reuters. The Fire Protection Research Foundation found in 2008 that adding a sprinkler system to a new home would add about $3,864 onto a 2,400-square-foot home.

However, Reuters reports that some insurance companies offer up to 10 percent discounts to policies when homes have fire sprinklers. With the increase in lightweight construction materials, fire experts say the sprinklers could save lives. But others argue that the decision to install fire sprinklers should be left with home owners, not a mandate among city or state governments.Source: Reuters

Everyone's finances are unique. As Mortgage Professionals, we are committed to helping our client’s structure and secure home financing that will help accomplish an overall financial plan. This can include debt reduction, real estate investment, and/or income security for the future.

If you need assistance, I put people ahead of policies, and relationships above revenue. People, we believe, always make the difference whether at work, home, or in the community. Over almost 30 years my customers trust our team to help them identify the right home loan and to provide a smooth closing, with no surprises.

Michael S. Richardson


Author of “An American Epidemic, Mortgage Fraud… a Serious Business

NMLS ID 216873- CO-LMB 100039988

Comments (1)

Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

Yes things are changing in the FHA loan and how it works.  That will effect the market for sure.

Dec 05, 2012 01:01 AM

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