More FHA Changes...For the better in my opinion We need FHA to be heathy

Federal Housing Administration (FHA) Commissioner David Stevens has announced a new set of policy changes designed to strengthen the FHA's capital reserves.

The FHA will increase the mortgage insurance premium (MIP) from its current level of 1.75% to 2.25%; update the combination of FICO scores and down payments for new borrowers; reduce seller concessions from 6% to 3%; and implement a series of measures aimed at increasing lender enforcement

U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December 2009, noting the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” Stevens says. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history.”

In addition to raising the up-front MIP by 50 basis points, the FHA will request legislative authority to increase the maximum annual MIP that it can charge.

If this authority is granted, the FHA will then shift some of the premium increase from the up-front MIP to the annual MIP. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing, the agency explained in a statement Tuesday.

The initial up-front increase will be included in a mortgagee letter to be released tomorrow, Jan. 21, and will go into effect in the spring.

Additionally, new FHA borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

The agency says this change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

The FHA additionally says its current seller-concession limit of 6% exposes the agency to excess risk by creating incentives to inflate appraised value. Reducing the seller-financing cap to 3% will bring the FHA into conformity with industry standards on seller concessions. This change will also be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

To support its lender enforcement initiatives, the FHA will begin publicly reporting lender performance rankings to complement currently available Neighborhood Watch data. The rankings will be available on the HUD Web site starting Feb. 1.

This is an operational change, FHA says, to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action, as Neighborhood Watch data is currently publicly available.

The agency will additionally enhance monitoring of lender performance and compliance with FHA guidelines and standards by implementing the Credit Watch termination through lender underwriting ID in addition to originating ID. This change, effective immediately, will also be included in a mortgagee letter tomorrow.


Starting in early summer, the FHA will implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process. Specifications of this change will be posted in March and subject to a notice and comment period before going into effect.

Moreover, HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes amendment of section 256 of the National Housing Act to apply indemnification provisions to all direct-endorsement lenders and legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This latter authority would permit HUD to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

SOURCE: Federal Housing Administration

HUD lift 90 Day Flipping Rule

HUD TAKES A NEW POSITION ON THE 90 DAY FLIP RULE … It’s OK Now!

HUD now believes the real estate market will benefit by allowing buyers to use FHA financing to purchase a home even when the seller has been on title for less than 90 days. Up to this point, only banks had the privilege of selling their recently acquired foreclosures to FHA buyers. Now investors and others who acquire real estate and want to sell within the first 90 days can. The waiver of the 90 flip rule is for one (1) year and takes affect on February 1, 2010. With tight underwriting guidelines, many home buyers are realizing that FHA financing is their only way to afford home ownership. More reasons why I like this change:



§ FHA buyers will have more homes to choose from

§ Investors will be able to attract a larger pool of home buyers

§ Buyer and seller agents will increase their closing ratios

§ Mortgage brokers will have more lending options for their clients


HUD’s updated policy comes with restrictions designed to prevent fraud so investors … pay attention:

1) There can be no relationship or interest between the seller, buyer or other parties to the transaction



2) Seller’s profit is limited to 20 percent above their acquisition cost


3) HUD may allow a sales price in excess of the 20 percent limit if the lender can document legitimate rehabilitation to the property and/or a second appraisal supporting value. In addition, the lender must order a property inspection and provide the report to the buyer prior to closing.

4) The same property flipped mutiple times ... big red flag and a No No!



KEY INFORMATION: Home buyers should expect some FHA lenders will not follow HUD's waiver and continue to impose the 90 day restriction. When getting pre-approved for financing, I suggest home buyers ask their mortgage advisor if they have lenders who accept HUD's waiver. If they don't, find a different mortgage advisor who does so you can shop till you drop and avoid surprises later.

Commercial market continues slide into 2010

The commercial real estate market will continue to get worse, only more slowly in 2010. But what does this mean for commercial property owners.

The overall assessment of Grubb & Ellis Company’s 2010 Real Estate Forecast released today, predicts another year of slow recovery. This doesn't bode well for owners looking to refinance debt. If values continue to slide albeit slower, equity positions will be reduced and available credit will be limited. The best best for commercial property owners is to convert all short term maturing debt into longer term fixed rate products.

Vacancy rates continue to rise as well. As this continues expect lenders to further tighen credit for new commercial financing. For access to many different commercial lenders, visit

HUD Eliminates 1% Cap on FHA Mortgages

In today's environment of help the customer and regulate the lender even more, HUD has decided to remove the 1% cap on FHA mortgages. Although state and federal guidelines will prevent usurious charges by any broker or lender, the rule change is designed to help FHA lenders to stay in compliance with the new RESPA rules starting this year. There is a chance that this will increase the cost of borrowing to borrowers in lower value states. If HUD puts a percentage limit on costs then we should see no discernible increase in overall borrower costs and this may even allow some lenders to lower their minimum loan amount thus making credit available for more lower income borrowers. We'll see. One thing is for sure, lenders, technology vendors and the like will no doubt experience pain putting these new rules in place. The sad reality is if they just enforced the existing rules, these changes would not be necessary. Get ready for even more regulation and licensing hurdles in 2010.

Happy New Year All!