FHA Mortgage Insurance Premium To Rise April 18, 2011

The FHA annual mortgage insurance premium is set to rise by .25% for any loan case numbers assigned after April 18, 2011.

Bob Mowrey, from Corridor Mortgage Group, let me know just what this could mean to FHA buyers.

On average, he says, this would mean that buyers will pay an extra $30/month. For a $300,000 loan, the difference in payment would be about $60/month.

FHA Homebuyers need to have their contract on a house in place, their loan in motion, and the FHA loan case number assigned prior to April 18, 2011 to qualify for the .25% lower mortgage insurance premium amount.

Please contact me for more information and details on the FHA mortgage insurance premium changes, and how they may affect your homebuying power!

Will FHA Be Flexible with Seller Closing Cost Assistance?

Will FHA be flexible with seller closing cost assistance?

That is possible, according to a report from National Mortgage News late last week.

FHA guidelines have changed, and more changes are on their way. Beginning Monday, October 4, the new FHA changes take effect, including lower upfront mortgage insurance premium and higher monthly insurance premiums.

In July, HUD asked for consumer comments on their proposed changes, including the lowering of allowed seller closing cost help from 6% down to 3%. The major problem with reducing seller closing cost help is that in Maryland, closing costs are very high. Many times buyers need 4-5% above the required 3.5% down to help them close on the house, since most FHA homebuyers do not have much money to put down, many times their reason for using an FHA insured loan. By reducing the closing cost assistance down to 3%, many buyers would be disqualified from being able to purchase homes, and this could hurt the Baltimore housing market tremendously.

Though I understand the need to lower seller concessions, hopefully the amount will not be reduced as drastically as originally planned.

Maryland FHA homebuyers should take advantage of the low prices, high inventory, and high seller contribution allowance before any more planned changes go into effect. Contact me and I can help you navigate your way through the FHA mortgage process before there are more modifications!

Does HUD Owe You a Refund?

Does HUD owe you a refund?

If you had an FHA-insured mortgage after September 1, 1983 and meet certain qualifications (including no refinance), then possibly!

Here are the eligibility requirements from their website:

Who may be eligible for an FHA refund or share?

Premium Refund: You may be eligible for a refund of a portion of the insurance premium if you:

-               acquired your loan after September 1, 1983

-               paid an up-front mortgage insurance premium at closing and

-               did not default on your mortgage payments.

Review your settlement papers or check with your mortgage company to determine if you paid an up-front premium.

Distributive Share: You may be eligible for a share of any excess earnings from the Mutual Mortgage Insurance Fund if you:

-               originated your loan before September 1, 1983

-               paid on your loan for more than seven years and

-               had your FHA insurance terminated before November 5, 1990.

Now, there are many things that could disqualify you, such as if your mortgage had been assumed by a new buyer, you refinanced that FHA loan because the new mortgage would have included that credit, if a claim had been made by your mortgage company against the FHA insurance, and if your shares remained unclaimed for over six years from the date of the notification sent to your last known address.

How much of a refund you may be due would be determined by the FHA Commissioner.

To see if you are owed a refund from HUD, search the database. You only need your last name, and then it is broken out by state.

If you are owed money, then go through the steps laid out on the site, and please let me know. I am curious to see how many people may have found money owed to them by HUD!

FHA Refinance of Underwater Borrowers

FHA is offering refinances for qualifying underwater borrowers, according to a mortgagee letter sent out by HUD last week.

Mortgagee Letter 2010 -23 came as a result of the changes announced by HUD in March 2010 in the MHA (Making Housing Affordable) FHA program.

The letter states that the focus of the program is:

These enhancements are designed to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan. This opportunity allows borrowers who are current on their mortgage to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10 percent.

Hopefully this will help a large number of people who do not want to leave their homes and can possibly make smaller payments per month to remain.

The refinances must have their case numbers assigned after September 7, 2010, and all of these qualifying loans must close by December 31, 2012.

The mortgagee letter is more than five pages long, and there are many details and eligibility requirements.

Participation is voluntary and requires the consent of lien holders. In order for a loan to be eligible, the following conditions must be met:
1.    The homeowner must be in a negative equity position;

2.    The homeowner must be current on the existing mortgage to be refinanced;

3.    The homeowner must occupy the subject property (1-4 units) as their primary residence;

4.    The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500;

5.    The existing loan to be refinanced must not be a FHA-insured loan;

6.    The existing first lien holder must write off at least 10 percent of the unpaid principal balance;

7.    The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;

8.    Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;

9.    For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;

10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;

11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and

12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

Baltimore underwater homeowners should find out if they are eligible by a Baltimore mortgage professional. If this option is not open to you, and you still want to avoid foreclosure in Baltimore, contact me to help you. There may be other options open to you.

New FHA Mortgage Changes H.R. 5981

Beginning October 4, 2010, new FHA Mortgage changes will be coming through, due to bill H.R. 5981 signed into law August 11.

Thank you to Dan Plunkett with Prosperity Mortgage, who clarified the changes in H.R. 5981:

The new FHA Mortgage changes include a reduction in the upfront mortgage insurance premium (also known as Upfront PMI) from 2.25% to 1%. The monthly mortgage insurance premium will rise from .50% to .85% on loans with more than 5% down over 15 years. It will rise from .55% to .90% on loans with less than 5% down (which many FHA loans are, since their minimum downpayment is only 3.5%).

Dan states that the amount borrowed will be lower, but the increased monthly mortgage insurance premium could effect approvals when the borrower is close in their income-to-debt ratio for qualifications.

It also will mean that monthly mortgage payments, in general, will rise for FHA loans.

Buyers wanting to take advantage of the FHA loan standards as they are need to be under contract and make loan application by the end of September, to ensure they have their case number assigned prior to October 4. Contact me today to take advantage of the FHA loan guidelines as they stand now!

New FHA Changes May Be Coming Soon

New FHA changes may be coming soon as HUD asks for consumer input on three issues that would affect borrowers.

I wrote about these possible changes in January, in my post “More FHA Changes to Happen Mid Summer.” Also in January, HUD made major changes in FHA fees and upfront mortgage premiums. These changes are to keep the FHA afloat to be able to continue to insure mortgages.

HUD released a letter Thursday asking for public comment, and posted the three questions for comment in the next 30 days on their website:

Question 1:

Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.

Essentially, if you have a low credit score, you would need to put 10% down rather than the usual 3.5% FHA financing minimum downpayment. This appears to be due to the large number of lower credit score borrowers defaulting on their FHA insured mortgages. The higher downpayment would give FHA more to work with should they need to foreclose on the FHA mortgaged home.

The good news is that the originally proposed increase for all FHA borrowers to 5% is not one of the questions posed.

Question 2:

Reduce allowable seller concessions from six to three percent. Allowing sellers to contribute up to six percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to three percent will bring FHA into conformity with industry standards.

This is the one that many of my clients in the past would have had issues with. Maryland closing costs are very high, and many borrowers need approximately 4-5% to cover the additional closing costs in addition to downpayment. This could really cause a big problem with Maryland FHA borrowers.

Question 3:

Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders will be required to consider those factors which are the best predictive indicators of loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio, and cash reserves.

This one would be the easiest change, because loans that must be manually underwritten tend to have big reasons that the digital systems would not allow them to go through.

What are your thoughts on the proposed changes?

Would any of these FHA changes prevent people you know from buying a home? It is very likely!

The one that concerns me the most is #2. The high Maryland real estate transfer tax rates are already an issue, and without a seller concession to help with the majority of the closing costs could make homeownership for many an impossibility.

Contact me today to take advantage of the FHA loan guidelines as they stand now, before any of these proposed changes may go into effect.

This Month in Real Estate July 2010

This Month in Real Estate July 2010 is here!

May’s sales across the United States were down 2.2% from April, but May closings were up 19.2% from May 2009. I am certain much of this is due to the extended homebuyer tax credit and buyers working to ensure they close long before the settlement deadline of June 30.

Though the tax credit is gone, interest rates are low, and housing prices are also low. Buyers can take advantage of these lows and possibly use an FHA to buy a home — and some may be eligible to have most of their closing costs paid for by the seller if they are able, or have some of their costs rolled into the loan, so those lucky buyers may only need about 3.5% (the downpayment minimum) out of pocket to get into a new home.

There are other FHA loans available as well, including some to get your home more energy efficient, FHA203K rehab loans to rebuild a fixer upper, and other FHA loan programs to assist in better homeownership.

For more information about Baltimore FHA home financing, please contact me today.

FHA Approves Electronic Signature

On April 8, 2010, FHA sent out a mortgagee letter stating that the FHA approves electronic signatures on documents, including contracts.

This is wonderful news, as I have recently begun to use Docusign electronic signatures for the convenience of my clients.

I also wanted to use this to prevent the use of paper as much as possible, since contracts can be anywhere from 35-50 pages, and often times many copies are made, wasting so much.

Here is a copy of the mortgagee letter from the US Department of Housing and Urban Development.

In speaking with T Jeremy Loomis, my mortgage partner, he stated that Wells Fargo’s policy is that the settlement papers must be done “wet” — actually signed in person with ink.

This is very exciting that FHA is trying to help make the contract process easier and more environmentally friendly.

Since implementing electronic signatures through Docusign for my Towson real estate clients, it has made things so much more efficient and “green”, and my clients have enjoyed the ease of contract completions!

FHA Mortgage Insurance Premium Goes Up April 5, 2010

Besides the tax credit deadline looming on April 30, another significant deadline is even closer — beginning April 5, 2010, the FHA Up Front Mortgage Insurance Premium is going from 1.75% up to 2.25%. April 5, 2010 is NEXT MONDAY!

I wrote about the rise in FHA Upfront Mortgage Insurance Premium on January 21, and time is now running out to get under contract before this change happens.

For any case numbers originating on or after April 5, the MIP will be 2.25%. This Friday, April 2, 2010 is Good Friday, so banks are closed.

This means for buyers to get the 1.75% premium, they need to be under contract and have all of their paperwork to their mortgage professional by Thursday, April 1, 2010 at the latest. (No joke!)

An example of what this means is that for a $200,000 loan amount, the current up front mortgage insurance premium to use FHA would be $3,500. As of next Monday, for the same loan it would be $4,500, costing a buyer $1,000 more.

Down the road, there are also expectations of reduced seller concessions and higher downpayment requirements for FHA borrowers. This means to buyers who are considering using FHA to obtain their loan should hurry to get the benefits as they stand currently!

Nine Weeks Left in Homebuyer Tax Credit Extension — Will It Be Extended Again?

A discussion I have been involved with here in the Baltimore area about the crippling snow and the effect on the Baltimore real estate market has people in the real estate world wondering if the homebuyer tax credit may be extended again.

On Monday, the Wall Street Journal wrote an article about the credit, and how lobbyists are gearing up to try to have it extended.

In the northeast, the sheer fact of houses not being able to be shown for the majority of a month due to the snow is a big part of the issue.

Other areas of the country make the point, as recounted in the Wall Street Journal article, that banks often are often taking a long time to approve short sales. I personally have found that this delay creates the issue of buyers who qualify for the credit not considering these homes as options.

It will be interesting to see if it will happen. Washington stated that it would not be extended further, and I can understand if that does not happen. Without the urgency of it ending, the credit cannot do its’ job, which is to help people get into homes.

The other looming deadline we have right now is the upfront Mortgage Insurance Premium for FHA loans, and the fact that that rate is going up from 1.75% to 2.25% for loans whose case numbers are assigned after April 5, 2010. This means that buyers desiring to use FHA financing should be pushing to have a home under contract by the third week in March, giving them about three weeks from now, to ensure their case number is assigned prior to April 5, 2010.

Two very important deadlines are looming, and I will be following how the Baltimore real estate market responds to them.

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