FHA Announces Risk-Based Premiums
A Special FHA Announcement from FHA Expert Jeff Mifsud
For the first time in history, credit scores will be utilized in FHA lending. Jeff Mifsud, LTB’s FHA expert, encourages all LTB members to review the important FHA guideline changes that become effective on July 14th, 2008.
The following information will be available on LTB’s Legislative Updates page, as well as Jeff’s website www.mseminars.com, where he offers one-of-a-kind FHA training to mortgage professionals.
Let’s take a closer look at the ten primary changes to the FHA guidelines:
1. Borrowers with either no score or at least 500 may get an LTV >90%; see matrix below.
2. Borrowers with a score less than 500 get a maximum LTV of 90%.
3. Borrowers without scores will require manual underwriting.
4. Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score.
5. The Monthly Mortgage Insurance will range from .50% to .55% depending on score.
6. The premium is based on the borrower with the lowest score.
7. If one of the borrowers has no score, then the Non-Traditional credit grade is used.
8. Credit rescoring is allowed to improve a borrower’s credit grade.
9. All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
10. Along with purchases, these changes apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.
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Property-flipping rule suspended
The White House temporarily suspends a rule that imposes a 90-day waiting period before foreclosed homes can be sold to receive government loans.
The Bush administration is temporarily suspending a 5-year-old rule intended to deter property flippers, as part of an effort to help speed the sale of foreclosed properties.
For one year, the Federal Housing Administration will no longer impose a 90-day waiting period before foreclosed properties can be sold to receive government-backed loans.
The policy was put in place in 2003 to deter property “flipping” schemes, in which buyers are overcharged for foreclosures or other distressed properties. But the surge in vacant properties resulting from borrowers who were unable to afford their mortgages has become a far more pressing concern.
“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” FHA commissioner Brian Montgomery said in a prepared statement.
The new policy “will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes,” Montgomery said.
Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48% from the same month last year, and up 7% from April, foreclosure listing company RealtyTrac Inc. said Friday.
Special thanks to Victor Carlino with Mountain West Bank for forwarding this information to me.
Filed under: For Buyers | Tagged: fha, lending, real estate
I noticed that there were no criteria for those that have scores above 500. Was this an oversight, or doesn’t FHA plan on seeking out those borrowers.
(ps: so that you know, when I remark, or disagree with some of your economic conclusions, I was an agent for over 10 years, then a mortgage loan professional for an additional 25 years.)
You know – FHA has never been credit score driven in the past – this is new territory for them. My best ‘guess’ (I’m not a lender) is that there are no changes to the current criteria for scores over 500 (ie, 12 months no late payments, etc.)
Anyone can disagree with me – heck, phenomenal minds disagree with each other – opinions are just that… opinions (including mine).
What I don’t allow (you haven’t done this, nor do I expect you to) are those that assume their opinions are ‘gold’ and everyone else is an idiot for saying/believing something different – and they do it by being rude, condescending or mean. I let those comments disappear. I don’t want this blog headed into ’sour puss attitude land’.
P.S. Thanks for visiting and commenting!
Ok – FHA Guidelines – I fully understand all that – but what lenders are actually underwriting to FHA Guidelines anymore – other than TBW (and I have not had any success with a below 580 submission to them) lenders in general are adhering to their requirement of 580 – even on FHA Secure – or is there a Secret List somewhere of lenders that are underwriting to FHA guidelines per above as noted ? Unless of course, you have an automated decision – and even then its still up to the lender to not pick apart the findings.
Joyce – I’m not a lender so I can not answer in depth on your questions.
In this particular post – I was only talking about FHA loans, not all lending in general.