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Oh No More FHA Changes and its only Jan 2013

Mortgage and Lending with and for 1st Time Buyers, Move Up Buyers & Investors 207897nmls# DOC#207897

January 30, 2013 11:06 PM

Oh No More FHA Changes and its only Jan 2013

Now many of you have been following my updates, blogs, and voicemail announcements for a while, and while some of you may be getting tired by the barrage of changes - with the market being in a constant state of flux these updates have become more and more necessary. I want my agent partners and our clients to be ahead of the curve of these changes so our buyers and sellers can take a pre-emptive stance, and keep those teniuos deals alive not matter what storm hits us first.

So here is an update on what's going on with FHA financing and what to prpeare your clients for - and no I am not a drama queen but please get ready to "Batten down the hatches!"

Federal Housing Administration Commissioner Carol Galante has just announced several significant changes to FHA requirements, processes, and fees in an ongoing effort by the agency to shore up its Mutual Mortgage Insurance Fund (MMI Fund.)

"These are essential and appropriate measures to manage and protect FHA's single-family insurance programs" said Galante. "In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers."

An increase in annual mortgage insurance premiums (MIP) on most mortgages by 10 basis points or 0.10 percent. Premiums on jumbo mortgages with balances of $625,000 or larger will increase by 5 basis points or 0.05 percent. This will bring jumbo mortgage premiums up to the maximum premium authorized by Congress. These premium increases exclude certain streamline refinance transactions.
FHA will reverse its existing policyof cancelling MIP on loans when the outstanding principal balances reached 78 percent of the original balance. Because FHA remains obligated to insure 100 percent of the outstanding loan balance for the life of the loan, homeowners will now be required to maintain principal payments over that period as well. FHA's Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy.
FHA will require lenders tomanually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent. Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded, using FHA manual underwriting and compensating factor guidelines.
FHA will propose an increase in the minimum down payments for jumbo loans from 3.5 to 5 percent. The proposal will be published in the Federal Register within the next few days.
FHA will step up its enforcement efforts for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures. Borrowers are currently able to access FHA-insured financing no sooner than three years after they have experienced a foreclosure, but only if they have re-established good credit and qualify for an FHA loan in accordance with FHA's fully documented underwriting requirements. It has come to FHA's attention that a few lenders are inappropriately advertising and soliciting borrowers with the false pretense that they can somehow "automatically" qualify for an FHA-insured mortgage three years after their foreclosure. FHA will work with other federal agencies to address such false advertising by non-FHA-approved entities.
Finally, as discussed in its Annual Report to Congress, FHA is also committed to structuring a new housing counseling initiativethat would apply to a number of borrower classifications, including borrowers with previous foreclosures.