FHA, the Federal Housing Administration, has announce many changes for 2010. The FHA wants to lower its market share in residential mortgages throughout the United States. They are currently insuring around 40% of mortgages throughout the nation. In an attempt to lower market share, they are increasing their UFMIP from 1.75% to 2.25% on all FHA loans. A little over a year ago, this amount was only at 1.5%. Most of the 2010 changes to FHA will not take place until April. Althought these 2010 changes to FHA are positive, it will also slow any recovery to boost the housing market. Odds are, they will only last for a couple of years. For more information on other loan products, visit Justin Messer at GBCmortgage.com.
The rumors are true and I am excited! FHA has handed down the changes...
FHA had talked about increasing down payment to 5% rather than 3.5%
- Increased Enforcement- HUGE WIN! Let's get the lenders that are not playing by the rules out of here- - the one's doing it right!
- MIP changes- not as big as you think- the analysis on monthly payment isn't a big hit
- We all have to follow the same rules, so no one has a leg up!
- 3% vs. 6% seller concession- talk to your borrowers about gifts!
Credit and Credit Scores
- New 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%. (PrimeLending requires a 620 credit score for all transactions)
- This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
- 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.
Reduce allowable seller concessions from 6% to 3%
- The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
- 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.
Increase enforcement on FHA lenders
- Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
- This is an operational change 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. Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
- Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
- This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
- 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 after a notice and comment period, would go into effect in early summer.
- 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. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
- Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
These changes are a positive move for our industray. Industry leaders will embrace them and continue to help more people achieve their dreams of home ownership!