FHA changes as of April 1, 2013

by Jann Swanson

FHA Looks to Shore Up Finances with New MIP Changes

 

Jan 30 2013, 2:45PM

Federal Housing Administration Commissioner Carol Galante has just announced several significant changes to FHA requirements, processes, and fees in an ongoing effort by the agency to shore up its Mutual Mortgage Insurance Fund (MMI Fund.) The first change - the consolidation of FHA's Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) with its Saver Fixed Rate HECM - was officially announced today. HECM is commonly referred to as a reverse mortgage and is available only to homeowners over the age of 62.

FHA said that the Fixed Rate Standard HECM pricing option currently represents a large majority of the loans insured through FHA's HECM program and is responsible for placing significant stress on the MMI Fund. To preserve the program as a financial option for aging homeowners FHA will make the HECM Fixed Rate Saver the only pricing option available to borrowers who seek a fixed interest rate mortgage. Using the Fixed Rate Saver for fixed rate mortgages will significantly lower the borrower's upfront closing costs while permitting a smaller pay out than the HECM Fixed Rate Standard product, thereby reducing risks to the Mutual Mortgage Insurance Fund. This change will be effective for FHA case numbers assigned on or after April 1, 2013.

Other changes for which official announcements will be forthcoming over the next few days are:

• An increase in annual mortgage insurance premiums (MIP) on most mortgages by 10 basis points or 0.10 percent. Premiums on jumbo mortgages with balances of $625,000 or larger will increase by 5 basis points or 0.05 percent. This will bring jumbo mortgage premiums up to the maximum premium authorized by Congress. These premium increases exclude certain streamline refinance transactions.
• FHA will reverse its existing policy of cancelling MIP on loans when the outstanding principal balances reached 78 percent of the original balance. Because FHA remains obligated to insure 100 percent of the outstanding loan balance for the life of the loan, homeowners will now be required to maintain principal payments over that period as well. FHA's Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy.
• FHA will require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent. Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded, using FHA manual underwriting and compensating factor guidelines.
• FHA will propose an increase in the minimum down payments for jumbo loans from 3.5 to 5 percent. The proposal will be published in the Federal Register within the next few days.
• FHA will step up its enforcement efforts for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures. Borrowers are currently able to access FHA-insured financing no sooner than three years after they have experienced a foreclosure, but only if they have re-established good credit and qualify for an FHA loan in accordance with FHA's fully documented underwriting requirements. It has come to FHA's attention that a few lenders are inappropriately advertising and soliciting borrowers with the false pretense that they can somehow "automatically" qualify for an FHA-insured mortgage three years after their foreclosure. FHA will work with other federal agencies to address such false advertising by non-FHA-approved entities.
• Finally, as discussed in its Annual Report to Congress, FHA is also committed to structuring a new housing counseling initiative that would apply to a number of borrower classifications, including borrowers with previous foreclosures.

"These are essential and appropriate measures to manage and protect FHA's single-family insurance programs" said Galante. "In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers."

For a copy of the entire HUD report, please email me at cindee@cindeestone.com

10 Ways To Successfully Prepare A Home For Selling

10 Ways To Successfully Prepare A Home For Selling

1. Go through your home and decide what you can throw away or put into storage. Pay extra attention to closets, bookcases, shelves and counters. Less clutter lets the buyer see the home, not your stuff.

 2. Buyers are very interested in the space your home can provide them, so organize accordingly. Bedroom closets should be cleaned so that hanging clothes are aligned and have lots of space. Don't have anything on the floors! Also, line up your dishes and glassware and make sure all drawers are neatly organized.

3. Clean, clean, clean!! Give your home a deep clean, including windows, carpets and appliances.

4. Paint your walls a neutral color. A fresh coat of paint is the least expensive, but most effective way to enhance the appearance of your home.

5. Light it up! Light gives the impression of space, so make sure you have tons of light in every room. Wash the windows, raise the blinds and turn on the lights. Higher wattage light bulbs can brighten dark areas, while dimmers can add a desirable feature to the home.

6. If you live in a single-family home or townhouse, make sure you maintain your lawn and landscape it prior to a showing. During the winter, shovel and de-ice the walkways. Make sure your balcony, deck and/or patio is inviting, with potted plants and flowers.

7. Make small home repairs as seen fit. This can include touching up your spackling and painting, replacing a cracked window or town screen, fixing a leaky faucet or even just changing burned our light bulbs. Every detail makes a difference!

8. If you do not plan on including personal property such as window treatments or light fixtures as part of a sale, remove them prior to your first showing and replace them with attractive alternatives. Use light, airy window treatments, like simple sheers.

9. Keep your pets out of the home during showings. If pet odors are present, have the home professionally cleaned and make sure you conceal food bowls and litter boxes.

10. A professional, licensed home inspector can spot the potential problems prior to your first showing. You may want to invest in one so that you can be sure you fixed all the problems before any potential buyers make them an issue.

FHA Flip Waiver to the 90-Day Restriction Has Been Extended

FHA Flip Waiver to the 90-Day Restriction Has Been Extended

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The Federal Housing Administration (FHA) recently announced that it is extending the availability of the temporary flip waiver that previously prohibited FHA financing for properties being resold within 90 days of previous acquisition. The flip waiver has been extended to December 31, 2014.

The waiver is applicable to all single-family properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties.

The waiver is subject to certain conditions, and mortgages must meet the following requirements to be eligible for the waiver:

• All transactions must be arms-length, with no identity of interest between the buyer and the seller or any other parties participating in the sales transaction.
• The seller must hold recorded title to the property.
• There's no pattern of previous flipping activity as evidenced by multiple title transfers within a 12-month time frame (this is not limited to just resales).
• The property was marketed openly and fairly, such as MLS, auction or FSBO.

Additional restrictions apply if the sale price of the property is 20% or more above the seller's acquisition cost. Under these conditions, the waiver will apply only if the lender meets the following requirements:

• Prospect requires a second appraisal (not charged to the borrower).
• An FHA appraiser must perform an appraisal in compliance with all FHA requirements.
• The second appraisal must justify the value increase above the first appraisal to be eligible for the waiver.
• A property inspection must be ordered and paid for by the buyer. Any health and safety issues discovered during the inspection must be satisfied and re-inspected by the home inspector after resolution.

If you would like to know more about the FHA flip waiver to the 90-day restriction and how these changes might benefit your clients, please contact me today.