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Separating FHA Fact From Fiction : Mortgage Insurance Premiums

On February 10, 2010, in Mortgage Programs & News, by admin | Comments

FHA asks Congress to raise Monthly MIPThe mortgage lending landscape changes a lot.  Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers in Tucson, Arizona that aren’t paying in cash.

The loan you get today won’t always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of “what’s coming next”.

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines.  Specifically, it announced 3 changes that will be effective starting April 5, 2010:

  1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
  2. Allowable seller concession reduced from 6% to 3%
  3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums.  This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA’s petition.

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, that doesn’t mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

FHA changes – here’s a quick run-down

On February 3, 2010, in FHA Mortgages, by Todd Abelson | Comments

I’ve received alot of calls asking me to summarize the “wassup in FHA?” Here’s quick run-down for your reference:

2/1       New condo rules begin.  All condos must show as “Approved” on the FHA website  https://entp.hud.gov/idapp/html/condlook.cfm. Select the HRAP/DELRAP option for searching.  I usually just enter the zip code and select “All”.  Many condos have different names or spellings and I find it helpful to check all of them in a zip code.  There aren’t that many.  No more “spot approvals” allowed by FHA. 

2/1       Effective until 2/1/2011 the 90 day flipping rule has been suspended.  HOWEVER, the loan must be an arm’s length transaction and if the value increases 20% over the seller’s acquisition price then we have to get a home inspection and justify all repairs, renovations, etc. with documentation.

2/15    HVCC rule applies to FHA loans.  The FHA Connection has been revised (which is what caused the delay in implementation). No more Originator-to-Appraiser communication allowed, just like with Conventional loans.

4/5       New up front MIP for all loans including streamline refinances is 2.25%. This will make every loan at least 1/2 point MORE EXPENSIVE.

Other changes “coming this summer to a Lender near you”… increased Monthly Mortgage Insurance and increased downpayment requirements for low-FICO borrowers. Standby for updates as they are announced.

Call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson, Arizona for all your Mortgage needs!

Best time to buy or refi, but time is running out!

On January 30, 2010, in Interest Rates, Real Estate Information, Tyler Ford & Todd Abelson, by Todd Abelson | Comments

We have all lived through MANY changes in 2009, not all good. However, we are at a critical point in the real estate and credit markets where it is the best time we may EVER see in which to buy a home or refinance an existing loan. Why? Rates are within ¼% of all-time lows, inventory is high, and the Federal Government is offering HUGE tax credits to first-time and move-up buyers.

BUT THIS IS ABOUT TO CHANGE AND YOU REALLY NEED TO BE AWARE!

FACT – the sole reason mortgage rates have remained low is because the Government committed to buying $1.25 TRILLION in “Mortgage Backed Securities” from Fannie Mae and Freddie Mac. This Program officially ends March 31, 2010. I guarantee you rates will increase swiftly and dramatically at that time. I expect rates to be about 6% by springtime and about 6.5% by autumn – up from the “4.somethings” we’re seeing now.

FACT – to qualify for the Federal Tax Credit of up to $8,000 for first-time homebuyers and up to $6,500 for move-up homebuyers you MUST have a formal contract in Escrow before May 1st. Given the activity I saw last November (before the extension) there was a noticeable run-up in prices and reduction in Seller concessions.

FACT – credit guidelines for Conventional, FHA & VA loans continue to tighten, while costs to obtain these loans increase. Effective April 5th, FHA is increasing the cost of their Up-Front Mortgage Insurance by ½% so, for example, the cost to purchase or refinance a $150,000 loan will cost you $750 more! And they’re not done; effective “early summer” FHA is increasing the cost of the Monthly Mortgage Insurance (amount unknown).

There is no other way to get across the TRUE message out other than for me to say:

  • If you are considering buying a home, I STRONGLY SUGGEST that you get in contract and lock in your rate in the next 45 days.
  • If you are considering refinancing your mortgage, I STRONGLY SUGGEST you proceed NOW! Rates are drifting higher and will continue until March 31.

If you or someone you know is considering purchasing a home or refinancing their existing mortgage please pass along this information. I cherish your trust and appreciate the opportunity to be of service to you, your family, friends and co-workers!

Call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson, Arizona for all your Mortgage Needs!

FHA to increase Mortgage Insurance & Down Payment

On January 21, 2010, in FHA Mortgages, Market News, Mortgage Programs & News, Tyler Ford & Todd Abelson, by Todd Abelson | Comments

In an attempt to recoup past losses, reduce the potential for future losses and sure up FHA’s sagging reserves a staggering series of changes will be implemented “soon”. Click here for article

First, and most immediate, the Up-Front MIP for all FHA loans will be increased from 1.75% to 2.25%. The start date for this increase will be announced today but Ianticipate it will begin with case numbers assigned starting February 1st. Following this in “the spring” will be an increase in the monthly MI fee as well.

Second, down payment requirements will be increase for 3 1/2% to 10% for “low FICO score borrowers” (under 580). This change is expected to be implemented “early summer”.

Third, the level of allowable “Seller Concessions” will be cut in half from 6% to 3%; this also will be implemented “early summer”.

Fourth, increased monitoring and enforcement on FHA lenders effective immediately.

These changes are H-U-G-E and will affect the entire market. While just loosening the anti-flipping rules 48 hours ago, this changes tighten – good for taxpayers, bad for sellers, buyers and the real estate markets.

For these and other breaking stories, stay in touch and call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson Arizona.

Spring 2010 FHA Guidelines Make Borrowing Tougher And More Expensive

On January 21, 2010, in FHA Mortgages, by admin | Comments

New FHA guidelinesSecuring an FHA mortgage in Arizona is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

  1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
  2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
  3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Tucson should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

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  • Tyler Ford: Great job Todd!
  • Tyler Ford: Seems as through the real estate market is picking up and home prices are stabilizing.
  • Gail Richards: Thanks Todd! More Great Information! Thanks for being on top of everything…your the best! Gail
  • admin: Hey Todd, Can’t wait to pick a winner!
  • steve kargel: Thank you Todd for sending us your updates and especially for insights like the Eller annual economic...

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