FHA Condo Rules Make Selling Many Condos Difficult

Recently, there were changes made to the FHA condo regulations on which projects can be FHA insured or not.

According to a Washington Post rundown of the changes, a major one is the “spot approval” that used to be acceptable to be eligible for an FHA loan. Another article goes more in depth on the issues this is causing for condo home sellers.

The agency eliminated spot approval earlier this year. Now, any condo buyer with an FHA loan must stick to an FHA-approved building. A lender, developer/builder, homeowners association or management company can submit a package to the FHA seeking approval. The change was part of a broader initiative to tighten FHA condo policy. Some elements of that initiative have been temporarily loosened through Dec. 31 to try to stabilize the condo market.Why? Condos are widely considered the market’s shakiest segment because they are popular with speculators and financially vulnerable entry-level buyers. A lot of foreclosure-related losses have come from condos, which is why industry policies have forced lenders to look more closely at the makeup of entire complexes before extending loans.

Without that FHA approval, it ties the hands of many buyers, as most would then need more money for a downpayment, which they may not have.

I did a quick spot check on Timonium condos on the HUD site where you can review FHA condo approval statuses. I was sad to see how many had expired, leaving any sellers in those buildings at a disadvantage! Of the 23 Timonium condo communities that came up when I searched 21093, 16 of them have expired. Here is a pdf of the Timonium FHA condo statuses as of today.

I have written much about the FHA Condo Recertifications, because we have so many Timonium condos that are now affected by these changes.

This is not good news, and I hope that the associations are working toward their re-certifications, though I understand across the US that many have tried and been denied over technicalities or other issues, and that the penalty for a director providing incorrect information (even if in error) faces $1 million in fines & up to 30 years in jail, so many are not willing to take on the risk.

Hopefully there will be another resolution on this matter, so affected condo owners aren’t hurt more by the inability to sell to FHA homebuyers.

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!

Why the Housing Market Bottom May Be Here

Many buyers and sellers are trying to time their sale or purchase based on whether they feel house prices may have hit the bottom or if they will fall further.

According to a recent USNews Money report, the housing market bottom may already be here. Why?

• Some areas show homes are undervalued, and increases in prices have already been seen. I know that a house that just came on the market nearby me in Towson sold in less than a week — with a large number of showings, and possibly multiple contracts.

• Affordability is great:  Interest rates as well as home prices have been low. Interest rates have been showing an upswing recently, so that affordability index may fall.

• Economic Factors are improving: Consumers are spending, larger companies have more money to hire, which will bring more demand to the real estate market. The foreclosure market, which, due to the subprime lending debacle, really came to a head in 2010 due to many of those loans hitting their 5 year-ARM mark, and made those mortgages unaffordable. Though 2006 still had some of those easier lending stipulations, many foresee the worst of that wave being behind us, and credit being eased a little as banks own less inventory.

Add onto these indicating factors that the FHA annual mortgage insurance premium will rise .25% for any loans having their FHA case number assigned after April 18, 2011, and you have many buyers needing and wanting to get into houses now, before that change happens.

Economists do predict that mortgage credit will open up a little more as we hopefully get further from the foreclosure crisis, which will open the door for some buyers to return to the market. What may happen, though, is that interest rates will rise a bit, possibly keeping prices a little lower than normal.

Contact me for Baltimore County real estate market information. I can help you figure out where your home falls in the housing market!

FHA Condo Approval Expiration Dates Extended

FHA Condo approval expiration dates were extended by the FHA, and this news shared by one of my mortgage partners, Brian Picker, of 1st Mariner Mortgage Corporation.

Thank you, Brian!

From Brian Picker, 1st Mariner Mortgage:

Big news as older FHA condo projects were set to expire yesterday which would have been a nightmare for getting them all re-approved by HUD in a timely manner.  In light of this HUD extended the expirations dates out based on when the original project was FHA approved.

FHA Condominium Project Approvals Expiration Dates Extended:

FHA announces extension of condominium project approvals with an expiration date of December 7, 2010. Provided below are the extension dates based on five-year time frames with the exception of those condominium projects with original approval dates from 1972 -1985.

Initial Project Approval Dates     Current Expiration Date        New Expiration Date

1972 – 1980                              December 7, 2010               December 31, 2010

1981 – 1985                              December 7, 2010               December 31, 2010

1986 – 1990                              December 7, 2010               May 31, 2011

1991 – 1995                              December 7, 2010               July 31, 2011

1996 – 2000                              December 7, 2010               August 31, 2011

2001 – 2005                              December 7, 2010               September 30, 2011

2006 – 2008 (Sept)                    December 7, 2010               March 31, 2011

The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions.  Lenders and/or other interested parties are encouraged to begin the re-approval or recertification process as early as possible as it is not anticipated that any further extensions of project approvals will be issued.

The Condominium look-up page and the FHA Connection databases were updated on December 7, 2010 and now reflect the extended expiration dates.  The links to the sites are:

Condominium look-up page: https://entp.hud.gov/idapp/html/condlook.cfm

—————–

I have written much about the FHA Condo Recertifications, because we have so many Timonium condos that would be effected by these changes. Luckily, it appears, if they haven’t been recertified, they have some time to do so!

FHA Condo Recertification Due December 7, 2010

With the many changes in the mortgage industry, it is hard to keep up with what deadlines are coming up next.

On December 7, 2010, the FHA condo recertification process must be completed by each individual condominium complex in order to be eligible for homebuyers to receive FHA financing in their building.

There is an application and process that must be completed in full for the building’s recertification to have the opportunity to be approved. Thank you to Dan Plunkett, of Prosperity Mortgage, a part of the Wells Fargo Home Mortgage company for sharing the two forms they must use to submit for approval.

One is the FHA New Condo Approval Process for condos that have never been approved for FHA financing in the past. These would usually be newly built units.

The other is the FHA Recertification Project Submission Form for developments that were approved before and need to go through the certification process again, which would be most condominiums.

The good news for most Timonium condo owners, most of the ones in the area have already been recertified. I wrote about the updated Timonium condo approvals in August, and even more have been added to the HUD site since.

During these confusing times, it is best to have an agent and a mortgage specialist who understand the muddy waters. Contact me if you are considering selling or buying a Timonium condo. My team of professionals can help!

*Since writing this, HUD & FHA have extended the FHA condo recertification deadlines. Here is more information about the FHA condo recertification deadline extensions.*

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!

Timonium Condo FHA Approval

At the end of 2009, HUD changed its’ condo approval process for FHA condo financing.

No longer can a community be given a “spot” approval when a unit goes under contract if a buyer desires to use FHA financing.

Condominium developments must be approved in advance of an FHA sale and the approval is only for a certain amount of time.

Many Timonium condo buildings have been approved already.

Luckily HUD has set up a website to check whether a condo development has been HRAP or DELRAP approved.

I entered the Timonium zip code 21093 to see all approved units. You can do this for any zip code if you are unsure of the condo development’s name!

Contact me if you are considering selling or buying a Timonium condo. I can help you navigate these tough waters!

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