In high-cost areas, the FHA national loan limit “ceiling” will increase to $636,150 from $625,500. FHA will also increase its “floor” to $275,665 from $271,050. Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150. This amount is 150 percent of the national conforming limit of $424,100.
We try to share real world scenarios with you to educate the public and the professionals alike in our industry. This week we have a buyer who qualifies all around. He works hard, gets overtime and can afford to buy. He is the perfect candidate. He has a child and lives with his girlfriend. And here is where it gets a little weird.
Most will agree that the modern family isn’t always a husband and wife and 2.3 kids anymore. In fact, more and more couples aren’t even married. But whether married or not, families have issues and arguements. and here is one case where an old wound rears its ugly head to throw a wrench in the mortgage process.
When qualifying for a mortgage we take into consideration all income, all credit report payments, and all loans and other items disclosed as liabilities, including alimony and child support.
In our case study, the buyer/borrower had a baby with a girl. Then he decided to go to college and play sports but decided not to pay his child support. The “baby momma” then filed a claim with the family court. These delinquent payments are reported on the credit report.
Since then the buyer has reunited with his “baby momma”, and it feels so good, they’ve decided to buy a home. All parties are getting along and that is great for the child and for the mother and father. However, they never update the family court and completed the proper filings releasing the father from having delinquent obligations.
Underwriters are tasked with making sure all borrower obligations and potential obligations are accounted for and documented as to why they are or are not included. Since there was no order updating the status of payments the buyer/borrower still appears to have outstanding child obligations, and delinquent at that.
It’s easy but takes borrower focus to get this rectified. If the mother and father simply go to the court and ask for new filings to update the credit bureaus and inform the underwriter of the current status of payments, if any, the mortgage process can be completed. With the borrower showing delinquent obligations and no current payments being made, the underwriter cannot properly account for the debt to income ratio and therefore not approve the loan to close.
Moral of the story, if you filing something with a city, county, state, or federal agency, make sure you update those agencies of any updates, like thefamily is together and all is good! So update those family orders and make sure you are prepared to buy.
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