Future FHA Changes

There are so many changes going on in the mortgage industry that it is no wonder we all seem a little confused, including underwriters.

FHA just recently relaxed the limits on origination fees and waived the 90 day property flipping rule for a period of one year. You can view the new property flipping guidelines here. Updates

What concerns me the most are the changes David Stevens, FHA Commissioner, is thinking about for the future.

• Raising the minimum down payment,
• establishing a minimum credit score,
• increasing the cost of mortgage insurance, and
• decreasing the amount the seller can kick in.

Read this article put out by the Wall Street Journal.
FHA Future Changes

I have some very real concerns about these changes. The average American, even with a job and good credit, doesn't have that kind of money set aside for a down payment and closing costs.

That only leaves them with two options: a VA mortgage, or a USDA Rural Development mortgage.

A VA Loan has always been a great 100% LTV loan for our veterans. Even though it does not require a down payment, the other guidelines are pretty strict. I'm sure the foreclosure rate is very low. I hope they don't start changing this program because our veterans have earned this exception.

The USDA Rural Development loans are also 100% LTV. They have a Guarantee program that is similar to a VA "Guaranteed" loan and they have a Direct Mortgage program with payments that can be subsidized by the Government. Both of these great programs are available but the property must be located in a rural area. There is more information here: Rural Development Guidelines

So, soon the average American will only have two options, unless they are a Veteran, and those are: buy a home in a rural area, or Rent!

FHA No Longer Limits Origination Fee

Good news for mortgage originators and lenders. FHA no longer limits the origination fee to 1%.

This is also good news for potential buyers looking for a FHA loan. Lenders and brokers are not non-profit organization. If they can't make at least a small profit on a mortgage they won't offer that option to borrowers. That is a no-brainer to anyone that understands the cost of origination and lending.

HUD's mortgagee letter 2009-53 covers the origination fee and the new Real Estate Settlement Procedures Act (RESPA).

The new RESPA requirements spell out how all the fees must me noted on the GFE and the settlement statement.

The new laws also require that a lender submit all GFE and Settlement statements in the case binder submitted for insurance endorsement.

FHA Expects all lenders and brokers will continue to charge reasonable fees. The new requirements will make these fees available for review.

I think this is a good thing for all legit lenders and brokers. It will remove all doubt or false accusations that have been the butt of political finger pointers. Most of which do not have a clue about the mortgage industry!