From Broker/Agent Social Network:

HUD Secretary Donovan and FHA Commissioner testified that they expect FHA to announce major changes to esure FHA’s long-term financial soundness.  Some examples are as follows:

1) Increase the down payment required from 3.5% to 5%

2) Raise the upfront premium from 1.75% to as much as 3%

3) Eliminate the ability to roll in to loan that up front premium

4) Increase monthly MIP from .55%

5) Reduce seller concessions from 6% to 3%

6) Raise minimum FICO score

7) Possible LTV maximums by FICO score

Increase accountability of FHA Lenders for fraud

Timing: “We expect these changes to be announced soon and could be implemented within a couple months.  None of these changes requires congressional approval and can be made administratively and therefore can be implemented quickly.”

This is of course going to make it tougher and more expensive for borrowers to obtain FHA loans and therefore reduce the number of eligible borrowers.

These are significant changes.

Most of my buyers over the past 12 months have been FHA approved. Changes in the downpayment requirements and premium costs are going to make qualifying for a government back loan much more challenging.

If you are considering making a purchase using a FHA loan, speak to you lender about how the timing of these potential changes affects your qualification status.

HUD Takes Action to Speed Resale of Foreclosed Properties to New Owners
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RISMEDIA, January 19, 2010—In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan recently announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration’s commitment to addressing foreclosure. Secretary Donovan recently announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential home buyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many home buyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

-All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
-In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
-The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

For more information, visit www.hud.gov.

Read more: http://rismedia.com/2010-01-18/hud-takes-action-to-speed-resale-of-foreclosed-properties-to-new-owners/#ixzz0d65JBrMX

A measure to help bring stability to home values and accelerate sale of vacant properties

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

Source: Lemar Wooley (HUD.gov)

Share the wealth:

I hate to tell everyone I told them so, but I posted a blog similar to this GREAT article a while back. I cannot stress to you enough how important it is to work with an FHA Lender in Texas that UNDERSTANDS and foresees these types of things! Read on.

Addressing Continued Concerns About the FHA

In January of this year, both Joe Murin and I were asked by HUD Secretary Donovan to remain as Ginnie Mae president and FHA Commissioner respectively to help the new Administration deal with the on-going housing crisis.  We both were privileged to be asked and were honored to continue serving in the Obama Administration for several more months.

However, today, as a former government official, if I could leave you with one message it would be this:

There has never been a point in our nation’s history that better illustrates exactly why FHA and Ginnie Mae exist. During these uncertain economic times, their counter-cyclical role of ensuring adequate mortgage activity and liquidity has been necessary and vital.

FHA has saved close to one million sub-prime/Alt-A borrowers from possible financial ruin by allowing them to refinance into a safe and secure 30-year fixed rate mortgage.  Another 2 million qualified borrowers (80% of them first-time homebuyers) have taken advantage of the declining house prices and historically low interest rates to purchase a home using FHA.  FHA’s role has grown substantially from three percent of lending activity by dollar volume in 2006 to nearly 25 percent of all mortgages originated today. That massive uptick in volume occurred almost overnight beginning in spring 2008.

Through it all…. FHA has helped pump more than $400 billion of mortgage activity and liquidity into the market since 2008, while still managing to deliver a higher credit quality borrower whose average FICO score is 700.

One can only imagine how much worse our economy would be right now without the FHA. However, the growth of FHA in the past 18 months has understandably attracted a lot of attention. While the FHA did not take part in the housing boom, it is feeling its effects.

As many anticipated, given the current sluggish economy, the FHA is experiencing an increased rate of delinquencies and more foreclosures.

Simultaneously, as home values fall or just fail to appreciate, the number of homes the FHA insures is rising significantly. In October, this forced HUD to announce that in 2010 the FHA’s reserves could dip below the mandatory 2% level required by Congress.

Reminder: FHA collects premiums from borrowers (revenue) and also pays out claims to lenders when loans go into default and foreclosure (outlays).

For FHA, the primary reason for continued defaults and foreclosures will be macro-economic problems that go beyond the scope of underwriting. For instance, continued job losses and the further decline of home values and equity.

Absent a massive economic downturn, I don’t believe FHA will face the same type of catastrophic losses we saw in the subprime sector. The reasons for FHA’s problems are very different from the ones experienced in the subprime sector where unsafe loan features and poor underwriting made investing in non-agency mortgages risky from the start.

The FHA has undeniably tightened guidelines in an effort to help ensure a higher loan quality.  Prospective borrowers must verify income and job history as part of a rigorous underwriting process.

I offer this assurance in an effort to raise your comfort level as to the future of FHA.  FHA must keep its eyes on the ball to make certain that American homeowners and renters are served while American taxpayers are protected.

As a reminder, I offer the following insight about the strategies the FHA is considering to ensure the market remains confident in the FHA’s risk management models:

• Tighten underwriting criteria
• Increase premiums
• Raise the down payment requirements above 3.5%
• Overlay a credit score cut-off

Looking forward it’s important for all of us to continue advocating for reforms that better ensure a vibrant, transparent, and sound mortgage marketplace. Current market conditions highlight the critical role of the private and public sectors in keeping mortgage credit flowing.

All of us are trying to make sure we are well positioned to continue serving customers as this industry moves through truly tectonic change. I welcome the opportunity to hear about the challenges you face and discuss how all of us are addressing this brave new world of mortgage finance.