FHA Lending Changes that Could Impact Real Estate Consumers
April 15th, 2010 categories: Money and Mortgages
Did you know that in 2009, the Federal Housing Administration (FHA) insured nearly 30% of the single-family mortgage market and that more than 50% of all first-time home buyers used FHA programs?
In today’s challenging credit climate, many home buyers and homeowners are turning to FHA for insurance, to purchase loans, and for refinancing options to get out of risky ARMs or subprime loans. I have access to information from the National Association of Realtors (NAR) regarding recent and upcoming changes to FHA’s single-family program that could impact the use of these important programs for consumers in the future. According to Jerome Nagy, senior regulatory policy representative at NAR, in order to replenish its dwindling reserves, FHA has implemented or proposed the following changes:
1. Mortgage Insurance Premium (MIP): FHA has increased the upfront MIP from 1.75% to 2.25% for borrowers while it awaits legislative authority to increase the annual premium. FHA stated it will decrease the upfront premium when they can increase the annual premium.
2. Credit Score Changes: FHA has proposed that borrowers with a credit score below 580 be required to make at least a 10% down payment. The minimum down payment will remain at 3.5% for all other borrowers.
3. Seller Concessions: FHA intends to propose a rule to decrease allowable seller concessions from 6% to 3%. NAR plans to argue against this decrease since closing costs differ greatly among states, and with fees on services (such ass appraisals) increasing, seller concessions can be a vital part of closing the transaction.
4. FHA Loan Limits: Current FHA loan limits are as high as $729,750 in high-cost areas, and are set to expire at the end of the year and revert to lower amounts, potentially putting a damper on a housing market rebound. A decrease of current limits would adversely affect 612 counties in 40 states and the District of Columbia, reports NAR, which is urging passage of legislation to make the loan limits permanent.
5. Condominium Rules: FHA is delaying implementation of “Mortgage Letter 2009-19″ and making temporary enhancements to the policy instead, such as eliminating the owner-occupancy requirement for FHA condo mortgages and reducing the number of units sold prior to FHA’s endorsement of a unit from 50% to 30%.
Please feel free to email me for guidance on the above programs and how changes might affect your particular situation. Also, please share this article with anyone you know who could be impacted by changes to FHA policy. Be sure to join others and become a fan of Kathy Villa Real Estate by clicking the link on the left. We’d love to connect with you!