Caroline Gerardo, C. G. Barbeau the Loan Lady nmls 324982 (CMG Financial)

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Rainmaker
680,174
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

My first thought is that FHA is trying to limit its risk somewhat. If the borrower who wants to refi to get cash out cannot qualify elsewhere due to a lower credit score, FHA might not want to loan them even more money than currently is owed.

Aug 20, 2019 04:44 PM
Rainmaker
1,119,737
Valeria Mola
SIB Realty - Miami, Sunny Isles Beach - Sunny Isles Beach, FL
305-607-0709 SIB Realty

For sure agree with all answers and Barbara Todaro 

Aug 20, 2019 05:33 PM
Rainmaker
1,238,991
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

I heard about that.  I think it's a good precaution.  Maybe they're seeing a potential problem that they're trying to head off?

Aug 20, 2019 10:55 PM
Rainmaker
1,556,661
Evelina Tsigelnitskaya
SIB Realty - Sunny Isles Beach, FL
www.SIBRealty.org 305-931-6931

Great information!

Aug 20, 2019 07:57 PM
Rainmaker
464,460
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Here we go again ... interesting answers.  IMHO I believe HUD is protecting their backside and there are those who would want people to panic or feel restricted. I believe we will be okay.  If a buyer has decent credit I recommend they stay away from FHA and go with the 3% down Conventional product.  Better all around.

Aug 20, 2019 06:32 PM
Rainmaker
1,606,624
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co. Notary Services, retired Realtor

I can happly say that I own my house outright so no worries there and with me being out of the RE business no worries there either Caroline Gerardo . HOWEVER my mobile notary business may be affected BUT again I think the whole thing is a political scare by those who hate (and yes it's evil HATE) our President.

Aug 20, 2019 05:54 PM
Ambassador
2,861,812
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Hmm very interesting Caroline, I didn't hear this yet, thank you.  It does leave some FHA borrowers out in the cold.

Aug 20, 2019 03:46 PM
Rainmaker
3,336,318
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hmm...a method to their madness or simply just madness.  Rhetorical, of course.  

Aug 20, 2019 03:30 PM
Rainmaker
4,996,898
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

that's going to put a crimp in the plans of many homeowners.... 

Aug 20, 2019 03:28 PM
Rainmaker
734,915
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

I think it's an attempt to reduce risk. Don't know enough to say if it makes sense.

Aug 21, 2019 04:15 AM
Rainmaker
3,095,943
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Can't say I've given this much thought. No doubt it will put restraints on some borrowers... then again, if this really does avoid foreclosures when the market turns, it may be a good thing.

Aug 21, 2019 04:07 AM
Rainmaker
4,448,515
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Carolyn,

Government madness once again...A

Aug 20, 2019 04:14 PM
Rainmaker
2,999,454
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

A home should not be an ATM to buy other things with yor equity. Working foreclosures, many of the foreclosures last time around were on cash out refinaces. 

Aug 21, 2019 05:12 AM
Rainmaker
761,101
Annette Lawrence , Palm Harbor, FL 727-420-4041
ReMax Realtec Group - Palm Harbor, FL
Making FLORIDA Real Estate EZ

As we all experienced, cash out was a common practice in the hay-days of 2005. I'm more likely to believe HUD takes over 10 years to address a problem.

I don't think they are sufficiently agile to take measures for the promised recession of 2021.

Unfortunately, it is always those most fragile who are harmed in all such 'protective' actions.  Why? They live a more reactionary life and really long term planning is not their 1st language. The often need the equity in their home to bridge the seasons of turbulence often encountered. HUD intends to impose FORCED wealth building by prohibiting cash out. One could build a good argument that wealth building changes the trajectory of ones future.

Aug 21, 2019 05:08 AM
Rainmaker
1,321,825
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

It does seem to have merit, considering we're talking about borrowers with low FICO scores which puts them in the higher risk category. What's to stop them from pulling maximum cash out and then stop making payments?

Aug 21, 2019 04:55 AM
Rainmaker
1,534,826
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

I thought it was proven last go around that FHA borrowers are not the low life's they are thought to be? I think the determination is the FICO score.

Life says you get a score on how you treat or use money. I do say that you shouldn't be able to tell people what to do with their 'money' aka equity. Given past experience, they'll blow it like they are at the crap table.

Aug 21, 2019 04:53 AM
Rainmaker
3,017,152
Richard Weeks
Dallas, TX
REALTOR®, Broker

Didn't know, thanks for the heads up.

Aug 21, 2019 04:18 AM
Rainmaker
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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Had not heard. Good to know. Thanks!

Aug 21, 2019 04:14 AM
Ambassador
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Interesting question and answers here, I seldom deal with FHA and would rather that most housing matters were in the private sector and the govt should limit all of their activities.

Aug 20, 2019 11:43 PM
Rainmaker
478,384
Jason E. Gordon
AmeriFirst Financial Inc, San Diego, CA - San Diego, CA
Sr. Loan Officer, CMPS, CDLP, RCS-D, CDPE, CMHS

HUD continues to shoot themselves in the foot. One of the few advantages they still had over Fannie/Freddie is now going away. 

Aug 20, 2019 06:38 PM
Rainer
185,365
Bob Betel
Allstar Home Mortgage, Inc. - Sweetwater, TN
President, Allstar Home Mortgage, Inc

I think this is a great rule change. It protects the consumer from over spending. People use FHA because of low FICO scores, so they are generally more risky. FHA is not doing this because of a recession, but instead, limiting their risk exposure. Why would anyone do an 85% LTV over a 80% LTV, just to get an extra $5-10K out of their equity. It is cost prohibitive

Aug 21, 2019 06:49 AM
Rainmaker
1,014,962
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

Americans are obseesed with refin, cash out go on a vacation to pay off more debts.

Aug 21, 2019 06:44 AM
Rainmaker
411,958
Dan Pittsenbarger
Keller Williams Western Realty - Bellingham, WA
Improving Conditions

I'm OK with it.

There are other ways for those with a low credit score to get cash out of their home (if there is any equity) to pay down debt or handle other problems. Folks can look into shared equity agreements - no loan, no hit on credit, no payments. If they use the money to pay down debt - they should be able to raise the credit score enough to qualify for conventional financing - then do a refi to buy out the equity agreement and get the lower interest rate.

Aug 21, 2019 07:02 AM
Rainmaker
769,166
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

It has always been my belief that the only cash outs allowed should be for home/property improvements...no consumer credit items

 

Aug 21, 2019 09:27 AM
Rainer
236,522
J.R. Schloemer, CRS
Kentucky Select Properties - Louisville, KY

I'm not a big fan of cash-out refis, never have been. So I am in favor of protecting funds and the market.

Aug 21, 2019 07:58 AM
Rainmaker
4,082,582
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

I can see this, and it would be better if homeowners would stop looking at their home as a bank.   Everyone would have more equity.

Sep 12, 2019 05:31 AM
Rainmaker
2,791,060
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Risk versus reward.

Profit versus loss. 

Aug 21, 2019 06:24 PM
Rainmaker
5,383,591
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Probably a smart decision.

Aug 21, 2019 12:01 PM