A Sequence of Steps being Taken by FHA to Strengthen Finances, Limit RisksCarol J. Galante, Interim commissioner of the Federal Housing Administration (FHA) recently announced the most recent in a sequence of steps being taken to strengthen and protect the FHA Mutual Mortgage Insurance Fund (MMI), while permitting the organization to continue on with its mission of providing homeownership access for borrowers that are qualified.
These new guidelines strengthen the practice in which FHA requires specified lenders to underwrite the U.S. Department of Housing and Urban Development (HUD) for those insurance claims paid out on mortgages which do not to meet FHA’s guidelines. Additionally, the concluding rule requires every lender who has the authority for insuring mortgages on behalf of the HUD ("Lender Insurance" mortgagee) to comply with stricter operating standards for acquiring and keeping their approval position. Over 80 percent of every FHA forward mortgage home loans are being insured using Lender Insurance lenders.
"Taken as a whole, the adjustments announced today are going to protect the FHA insurance fund from inappropriate and unnecessary risks while providing clear guidelines to lenders with regards to HUD’s underwriting require" Acting Commissioner Galante said. "FHA must continue the balance between supervising risks for its insurance fund and making certain that FHA commodities are offered as broadly as feasible to qualified home borrowers. We anticipate that this additional clarity and certainty added through these new guidelines will permit lenders to extend additional financing opportunities to greater numbers of U.S. families as the economy of the nation and the housing market begin to recover."
For loans insured by the Lender Insurance lenders, furthermore HUD could require lender underwriting for ‘material' and serious violations of the FHA origination regulations and for misrepresentation and fraud such as a mortgage which should never have been originated by the lender in the first place. In addition, the regulation modifies the basis for which lenders may be qualified to obtain Lender Insurance authority.
A participating Lender Insurance mortgagee is required to demonstrate two-year of severely delinquent and claim rates meeting or less than 150 percent of the aggregate rates for the states which the lender is doing business. Further, FHA will be monitoring lender operations on an a regular basis to assure that participating lenders persist in falling within the program’s standards of eligibility. Lastly, the guidelines establish a procedure by which additional HUD-approved lenders formed through corporate acquisitions, mergers, or reorganizations are measured for Lender Insurance authority.
In a detached Federal Register notice soon to be released, the FHA is proposing to cut the allowable maximum seller concessions from its current point to a level more lined up with industry standards. The current amount leaves the FHA open to unwarranted risk by initiating incentives to inflate appraisals. The amended proposal is a reflection of public comments gathered during an earlier proposal that was broadcasted within a Federal Register notice, July, 15, 2010. The revised proposition is calling for a 30 day comments phase. Following an examination of those public comments obtained, a final ruling will be issued.
Big Price Cuts to the FHA Streamline Refinance AgendaMarch 14, 2012
Carol Galante, Acting Federal Housing (FHA) Commissioner recently announced some large price cuts to the FHA Streamline Refinance Agenda that just might be of benefit to millions of borrowers who currently have mortgages insured by FHA. Starting June 11, 2012, is the timeframe FHA is going to lower the Mortgage Insurance Premium (UFMIP) it charges upfront to only .01 percent and drop its annual mortgage insurance premium to just .55 percent for qualified FHA borrowers.
Borrowers need to be current on the FHA-insured mortgages they have now to qualify which were endorsed prior to May 31, 2009. In the later part of last month, FHA additionally announced it will be increasing the premiums paid upfront on just about all other loans up 75 basis points up to 1.75 percent. Additionally, FHA is raising annual premiums up 10 basis points plus 35 basis points on mortgage loans in excess of $625,500.
This is a way that FHA will make a big difference in helping homeowners who are taking care of their obligations and paying their bills in a timely manner and want to benefit from the low interest rates in place today, By drastically reducing refinancing costs for these qualified borrowers, FHA can assure they reduce their monthly mortgage obligation, which will be advantageous to the real estate market and broaden the economy along the way.
Presently, 3.4 million families have loans endorsed prior to May 31, 2009, and are paying an annual interest rate in excess of five percent on their existing FHA-insured loans. If they refinance using this streamlined procedure, FHA estimates that the typical FHA-insured qualified borrower will save about $3,000 annually or $250 about each month. the new FHA discounted rates assume no increased risk to the Mutual Mortgage Insurance (MMI) Fund and would let many of these present borrowers refinance their old loans into a lesser cost FHA-insured loan without the need for additional underwriting.
Current FHA-insured homeowners need to see their present lender to ascertain their eligibility. During last month, the present Obama Administration revealed a broad packet of legislative proposals and actions to assist responsible homeowners to conserve thousands of dollars by refinancing. This includes the modifications announced today which will be an advantage to current FHA borrowers especially those whose loans may be in excess of the present value of their property. With this reduction of monthly loan costs for borrowers, FHA has hopes of helping more homeowners remain in their houses, thereby diminishing the potential for default down the road and cutting losses to the FHA Mutual Mortgage Insurance (MMI) Fund. These modifications outlined in the lender letter today apply to all loans insured under the FHA Single Family Mortgage Insurance Plans with the exception of:
- Title I
- Home Equity Conversion Mortgages (HECM)
- Section 223(e) (Declining Neighborhoods)
- Section 247 (Hawaiian Homelands)
- Section 248 (Indian Reservations)
• Quick and Dirty Guide to FHA Mortgages - With over 250,000 books out in print, Peter G. Miller a syndicated columnist on real estate knows the FHA programs forwards and backwards. This handy guide takes a look at the FHA loan program along with successful loan applications, appraisals, buy-and-fix financing, credit scores, Title 1 loans,, flipping, reverse mortgages, insurance premiums, streamline refinancing, refunds, "seller contributions", down payments, and much more.
For more details, go to www.hud.gov.
90-day resale waiver extended through 2012
For the second consecutive year, the Federal Housing Administration has extended it's temporary "anti-flipping" waiver meaning homebuyers purchasing homes which have changed ownership during the last 90 day period may continue to rely upon FHA-insured financing This waiver is a godsend for investors rehabbing and then flipping properties, as it enlarges the eligible borrower pool to include those requiring on FHA-insured loans, popular with every first-time homebuyer and others short on the funds for a big down payment.
FHA said,. In extending their waiver through the end of 2012, FHA said that every sale must continue being arms-length transactions. For situations where the property sales price exceeds 20 percent the seller’s initial acquisition cost, a waiver will only apply where the lender is able to document justification for increases in value,
FHA put this anti-flipping rule into effect during 2003 to protect the mutual mortgage insurance program (MMIP) from losses from homes which were simply flipped, rather than being rehabbed. Homes foreclosed on by Freddie Mac, Fannie Mae, plus federal and state financial chartered institutions were exempted from this rule.
In February of 2010, the Obama White House administration waived the resale waiting period -- including homes acquired and rehabilitated by private investors -- with the hopes of revitalizing communities and stabilizing home prices affected by foreclosures. It most often takes under 90 days to purchase, rehabilitate and resell properties, HUD said at that time. Some rehabbed properties sellers had voiced reluctance in entering into purchase agreements with FHA buyers die to the added expense of holding on to a property for a 90 day period, HUD had said.
As they extended the waiver through the end of 2011, FHA stated it had insured over 21,000 properties in the 90 day flip category worth over $3.6 billion during 2010 that would have otherwise not qualified for financing. That figure has since expanded to almost 42,000 mortgage loans worth over $7 billion for properties that were resold within a 90 day time frame of initial acquisition.
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Mar 18, 2012
Real Estate Finance
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