TAG | fha loan guidelines
The Federal Reserve is in the process of ending its purchase program of GNMA Mortgage Backed Securities that has been responsible for the recent streak of the lowest mortgage interest rates on record for FHA loans.
The Federal Reserve Bank is poised to pull the money off the table that has helped sustain the ailing real estate sector, $1.25 trillion to be exact, by March 31, 2010.
If you are considering a fha mortgage loan and you are on the fence about when to act, now is the right time. Rates are not likely to be this low much longer.
In recent testimony during a hearing before the House Committee on Financial Services, HUD Secretary Shaun Donovan outlines several new policies in FHA to address the quality of the existing portfolio, improve the performance of future books, and return the capital reserve to above the legislated 2 percent level, while also ensuring that the FHA continues to contribute to the nation’s housing recovery.
An initial measure is to reduce the maximum permissible seller concession from its current 6 percent level to 3 percent, which is in line with industry norms, and we will continue to consider additional reductions. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.
Secondly, to protect the fund from the riskiest borrowers, the FHA will for the time being also raise the minimum FICO score for new FHA borrowers.
The FHA is currently analyzing what this floor should be, including the relationship between FICO scores and downpayments to determine whether FHA should increase FICO minimums in combination with changes to other underwriting criteria for lower downpayment loans.
Third, the FHA has made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA mortgage loan – to make sure that FHA borrowers have more “skin in the game” and a stronger equity position in their loans. There are several ways to accomplish this, and so the FHA is currently analyzing various options to determine which is the most effective and consistent with our mission.
Finally, the FHA is examining the FHA mortgage insurance premium structure to determine whether an increase is needed and, if so, whether it should be the up-front premium, the annual premium or both. Our current up-front premium of 1.75 percent is below the statutory cap of 3 percent, while the annual premium is currently at the statutory maximum. To protect against future uncertainty in market conditions, the FHA is requesting authority from Congress to raise annual premiums, as this is one of the most effective means of raising capital for the fund with the least impact per borrower.
Corresponding to the Janurary 1st overhaul of RESPA regulations, the Good Faith Estimate and the HUD-1 settlement statement for mortgage loans, HUD announced today that it was raising the allowable origination fee for lenders and removing the 1% origination fee cap that was in place.
Does this mean that the total fees to get an FHA Home Loan are going to go up? Not necessarily. This cap was removed, in part, due to the fact that new RESPA rules removed Lender’s ability to charge many of the fee’s that accompany the “Standard” origination fee, such as processing fees, administrative fees, underwriting fees, wire transfer fees, etc.. To simplify these fees to the borrower, it appears that HUD had the intent of removing this cap on origination to allow for all fee’s to be grouped into one single origination charge and presented to the borrower as a bottom line figure that can be easily compared with offers from other mortgage lender’s. Read More
