TAG | fha mortage
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.
Beginning this summer, sellers will not be allowed to give as much help to buyers to pay their closing costs when purchasing with an FHA Mortgage. The maximum allowed amount of seller assistance will drop to 3 percent of the sales price, down from the current 6 percent. This change will bring FHA into conformity with industry standards on 3% seller concessions.
New borrowers who get an FHA Mortgage Loan will soon have to pay a higher initial mortgage insurance premium (MIP). The new premium will be 2.25 percent of the total amount of the loan, up from the 1.75 percent that has been set nearly a year earlier.
In December of 2009, the FHA was insuring 5.8 million homes that had a total loan balance of greater than $750 billion. More than 500,000 of the loans were seriously delinquent and heading toward foreclosure. Many of these bad loans were made in 2007 and 2008 as the market was plummeting.
The initial MIP increase will go into effect this spring.
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
The U.S. federal government is slowly extracting itself from the MBS market for home loans, closing out several emergency measures put into place in the throes of distress last year to prevent a collapse of mortgage finance.
According to a recent WSJ online article, The Federal Reserve’s $1.25 trillion program to purchase mortgage-backed securities, considered the most critical support, will draw to a close in the first quarter of 2010. Fannie Mae, Freddie Mac and Ginnie Mae will then be without a government buyer of last resort for their home loans for the first time since the mid-1990s and will have to rely solely on private investors.
Simply put, this means that interest rates can not remain at their present levels for much longer. If you are on still on the fence about a refinance or home purchase, the time to move is now. Learn more about Home Mortgage Loans, FHA Loans, USDA Loans, VA Loans and Jumbo Loans and Conventional Loans at www.loans-101.com.
From the FHA:
Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010. ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes.
Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter. However, lenders should be aware that the requirement for inputting the appraiser ID and the appraisal assignment date in the FHA Connection case number assignment screen will be removed. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Update Screen once the completed appraisal is received by the lender and prior to closing the loan.
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Lawmakers look to make FHA Loan Limits Permanent
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Nick Timiraos – WSJ Online
As the Federal Housing Administration begins considering how to pull back from its expanded share of the U.S. mortgage market, the agency could face pressure from some lawmakers and those in the real-estate industry who don’t want the FHA to do anything too dramatic.
Lawmakers from high-cost housing districts, for example, want to ensure that the FHA doesn’t disappear from their neighborhoods. They’ve introduced a bill that would make permanent the higher loan limits that Congress temporarily expanded last year. That allowed the agency to insure loans as large as $729,750 in the nation’s most expensive housing markets, up from a $362,000 national cap. California now accounts for around 13% of FHA-backed loans, up from less than 2% during the housing boom, partly because of the higher limits.
