Posted by John Scott Smith on Mon, Feb 22, 2010 @ 02:29 PM
Over the weekend, John Rebchook of InsideRealEstateNews.com, wrote an excellent piece complete with video links on FHA Chief Stevens' visit and address in Denver, CO.
Now, over recent months, we have been hearing increasingly loud shouts that FHA should tighten its qualification guidelines, and FHA has decided to do just that. However, the FHA was specifically put in place in order to help people that were not being helped by the banks. As part of FDR's New Deal, the FHA was designed to help people of more modest means become homeowners, even when the banks were shoring up their assets which made it more difficult for borrowers to access capital. (Sound familiar?)
Fast forward seventy-eight years, and if FHA reacted to the current housing problem in the same way that other lenders were, by increasing both down payment requirements and credit score requirements, then wouldn't that be effectively pushing out the very people that it was created to help? As someone who follows developments with FHA closely, I've been concerned about this for some time.
Fortunately, FHA Commissioner David Stevens is committed to staying the course. When he spoke in Denver, Stevens said that “Our primary job is to help the under-served buyer in Atlanta, Georgia, or Detroit, Michigan, or New Orleans, Louisiana.” (Emphasis added.)
Now that the insurance premiums have been modestly increased from 1.75% to 2.25% of the total loan, and the minimum credit score in order to qualify for 3.5% down payment has been raised to a 580, the under-served buyer can still get the help that they need, and the FHA can shore up its reserves.
There will still be cries to raise the down payment even more. Critics will say that buyers need more "skin in the game". My hope is that Commissioner Stevens will become a more vocal proponent of letting FHA be what it was established to become.
What do you think? Is FHA on the right path, or should it tighten its requirements, further?
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Posted by John Scott Smith on Tue, Jan 05, 2010 @ 03:26 PM
As of February 1, 2010, HUD brought about the end of "Spot Loan" approvals for condos. The ramifications of this are substantial.
Now, if the condo complex is not already approved, the entire project will have to "be submitted for full review by HUD staff."(See question number three on that HUD page.) Essentially, the process by which condos become FHA approved just became much more onerous. Unfortunately, there's more...
Even if a condominium or townhouse complex is already approved, there are concentration guidelines outlined in HUD's Mortgageed Letter 2009-46B (see point number ten in that letter), which will require constant monitoring
Explanation: in order to avoid overexposure, HUD has outlined "concentration" maximums of thirty percent (30%). (If a condominium complex has ten units, that means that no more than three of those units can have an FHA mortgage on them at any one time.) Once a complex meets its maximum concentration, no further case numbers will be issued unless and until one of the pre-existing FHA mortgages is fully satisfied.
Confounding this further, condominium approvals expire every two years requiring recertification, AND there is no place on the HUD webpage that indicates exactly which addresses, if any, already have FHA mortgages. HUD does not indicate whether a case number will be issued on a unit which already has an FHA mortgage, which would allow a unit to pass FHA eligibility along from owner to buyer. Nor, do we know how often HUD updates its public database.
In order to assist you, MyFHA has found a private company that maintains a database reputed to be even more accurate than HUD's. FHA Pros constantly monitors concentration of FHA approved condo and townhome complexes by keeping updates from title companies across the country. These updates include which units in which complexes close with an FHA mortgage. In this way, their information is the most up-to-date that we have been able to find. And, yes, we have blind-tested their services before giving our endorsement.
As with any endorsement that MyFHA delivers, we ask you, our customers, to please keep us informed of any problems that you may encounter as well as your successes with FHA Pros either by posting, below, in the comments, or send an email directly to me, jssmith (at) myfha (dot) us.
Yes, we expect that these changes are likely to affect both the market and the ease with which you can finance a condominium. We will continue to keep you posted as more news, both positive and negative, is released on this and other changes.
Keep informed on the latest developments on news and policies affecting the FHA and FHA mortgages by following us on Twitter or Facebook. You may also follow the author, John Scott Smith, on Twitter.