As we all know FHA has become one of the top programs for home purchasers and has also become a key tool for some who need to refinance in 2010. Earlier this year we had an increase in the upfront mortgage insurance premium from 1.5% to 2.25%. This had a slight increase in cost to the borrower. The increase was part of the FHA Reform Act passed by Congress in order to beef up the capital reserves for HUD’s mortgage program that had been dwindling for several months.
Last week FHA Secretary David Stevens announced that Congress passed another increase to the MI factors to further support the capital reserves of the program. The upfront mortgage insurance premium will actually be reduced from 2.25% to 1%, but the monthly MI factor (that which has a great impact on a borrower’s payment) will be increased from .55% to .85%-.90%. This increase is set to take place in less than a month on September 7th.
The truth is that FHA actually has the ability to raise the upfront premium even more in the future, but for the time being are going to reduce it to 1% to help make the adjustment a little less painful. At this point, FHA case IDs pulled before September 7th will have the current rates. Anything there after will be subject to the coming change.
If you are thinking about buying you may want to look seriously in the month of August in order to have a contract in place before the change. If you have questions or want to start a loan application you can email me or call 503.798.9183.
A couple of weeks ago Fannie Mae (FNMA) announced yet another game changer to the mortgage and real estate industries. The FNMA LQI (loan quality initiative) was introduced to the mortgage world. Effective for loan applications originated on or after June 1, 2010 (my birthday) Fannie Mae will require a credit “refresh” within 72 hours of funding. The purpose of this credit refresh is to determine any change in a borrower’s debt load from time of application. Credit reporting agencies have made a credit comparison report available. The comparison report will be pulled within 72 hours of funding. If an increase in a borrowers debt capacity and/or undisclosed debts from time of initial application have been identified then a refreshed report will be issued and the file will be sent back through underwriting.
An increase in a borrower’s debt capacity may be a result of:
A new debt
Increase of minimum payment for revolving debt (credit cards, store cards, lines of credit)
Student loans coming out of deferment
As you can imagine, this will inevitably cause delay in funding a loan when a borrower’s debt capacity has been impacted. If a borrower incurs new debt and does not disclose the outcome of loan approval may be changed. Fannie Mae’s primary goal is to insure a borrower’s ability to sustain homeownership. It’s important to look at a borrowers total debt capacity at time of final loan application.
Responsibility:The Lender – Lenders are responsible for accurately qualifying borrowers and assessing their ability to repay their loan. Sound underwriting are implemented to exercise due diligence throughout the entire origination process. The responsibility of the loan file begins at time of application and carries through to closing.
Responsibility: The Borrower – Borrower’s have the responsibility of providing the lender with accurate and complete information for the loan application. It’s always been important, but now is even more important for a borrower to notify the lender of any changes to their employment, income, debt obligations or other financial circumstances during the application process.
The bottom line: As you embark on your next financing transaction (purchase or refinance) make sure you fully disclose all debt at time of initial application. Any new debts that may not be reporting at time of application will surely reveal themselves and may cause you an issue in obtaining loan approval. Spending/borrowing on revolving accounts must be managed very carefully and/or completely avoided. Please remember that even a small change in one of these payments could potentially cause your debt capacity to increase and will result in a re-underwrite of your loan which will result in a delay of closing.
I am always here as a resource, in process or before you decide to make a move. Please give me a call (503.585.1105) or shoot me an email to inquire about your specific refinance or purchase questions.
USDA has announced that the funds allocated for rural housing home loan program for the fiscal year of 2010 will likely be depleted prior to the end of April. The rural housing program budget is set in October each year. The increasing propularity of this program caused a double of funds from 2009 to 2010, but the picture is now clear that the increase was still insufficient.
Along with the announcement from USDA we received an email from nearly every lender stating they highly advise files be placed in line for underwriting to reserve the funds ASAP. In past years, the USDA program funds have neared depletion towards the end of the budget year allowing for USDA to give a “conditional funds approval”. This year we will not have this flexibility since we are still so far from the budget allocation. Therefore, I strongly urge anybody looking to purchase with the USDA rural housing home loan to make an offer sooner than later.
If you are looking to purchase or you have clients looking for homes and planning to use the USDA program, please call me and confirm the update on funds availability prior to making an offer.
As a borrower it may be a bit more difficult to obtain FHA financing in 2010. Today the FHA announced a series of changes to the FHA insured mortgage program aimed at increasing home ownership in underserved neighborhoods. The program has become the most widely used program for first-time buyers or move up buyers with down payments less than 10%.
In the FHA official announcement today it spelled out a series of changes that will increase the capital fund of FHA as an effort hedge against the increase of defaulting mortgages. Fortunately FHA retained the minimum down payment of 3.5%. The changes will consist of the following:
Increased mortgage insurance premium by .5% (from 1.75% to 2.25%).
Seller concessions (credit towards closing costs) reduced from 6% to 3%.
Increased enforcement on FHA lenders/banks.
580 FICO score now required to qualify for 3.5% down payment program (Scores below will require 10% down payment. However, nearly all FHA lenders nationwide have a minimum 620 FICO score overlay).
The changes come as a necessary precaution for FHA to avoid asking the federal government for assistance to sustain it’s mortgage insurance for homeowners. FHA does not actually service the mortgages issued by FHA, but insures the loans serviced by the banks.
As a borrower, the increased mortgage insurance premium will have a small impact on your monthly payment and the limit of 3% seller concessions may require you to come to closing with a bit more cash to cover the exceeding amount of closing costs and prepaid items.
The increased enforcement on FHA lenders/banks will be determined by each banks servicing and performance of current FHA loans. As a precaution to retain the ability to fund FHA loans we will see increased lender guideline overlays in the near future. A guideline overlay is an individual lender/bank guideline that is usually more stringent than the standard loan guidelines. As a result guidelines may vary significantly between banks.
We will likely see an increase in FHA loan denials in 2010. A borrower’s FHA loan may be denied simply because it was sent to the wrong FHA lender. If you have questions about an FHA loan or want to know if you qualify feel free to give me a call or email me. As a broker, Landmark Mortgage has several options for FHA lenders. It will be important for borrowers to work with a knowledgeable broker who has experience and options for each FHA loan applicant. As a loan officer I will find the right fit for your specific loan profile.
FHA will issue a Mortgagee Letter tomorrow announcing the exact dates of implementation.
November 30th (the expiration of the first time homebuyer tax credit) is just around the corner. Make sure your buyers are making an offer leaving sufficient time to close. Oh yeah, and these fabulous rates…they won’t be around forever!
Dealing with life after Taylor, Bean and Whitaker… Be prepared to time your closings accordingly. The closure of the nation’s largest FHA lender has had an effect on the entire wholesale mortgage market. Check out the video below:
Ok, so Taylor, Bean and Whitaker has officially announced the ceasing of all origination operations. If you are a Realtor, please make sure you’re clients are placed somewhere else quickly. Again, none of my loans in process are being underwritten by Taylor Bean.
If you have any questions or need help finding a suitable source for your loan or a clients loan, please don’t hesitate to contact me.
TBW Press Release:
PRESS RELEASE
TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATETLY
Ocala, Florida – Taylor, Bean & Whitaker Mortgage Corp. (“TBW”) received notification on August 4, 2009 from the U.S Department of Housing and Urban Development, Freddie Mac and Ginnie Mae (the “Agencies”) that it was being terminated and/or suspended as an approved seller and/or servicer for each of those respective federal agencies. TBW has unsuccessfully sought to have the termination/suspension decisions of each of those agencies reversed. As a result of these actions, TBW must cease all origination operations effective immediately. Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline. TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events. We understand that this could have a significant impact on our valued employees, customers and counterparties, and are very disappointed that a less drastic option is unavailable.
As we all know FHA has become one of the top programs for home purchasers and has also become a key tool for some who need to refinance in 2010. Earlier this year we had an increase in the upfront mortgage insurance premium from 1.5% to 2.25%. This had a slight increase in cost to the borrower. The increase was part of the FHA Reform Act passed by Congress in order to beef up the capital reserves for HUD’s mortgage program that had been dwindling for several months.
