FHA Changes Not Primroses

Primroses from Caroline Gerardo's Organic Garden

 

FHA Policy Changes Frowny Face :(

Mortgage FHA changes, everything is not coming up primroses…

Is an FHA loan the best thing for an Orange County Buyer? Maybe not with all the new rules coming in the next few weeks.

Here are the legal FHA Change Effective Dates for those detail oriented home shoppers in Newport Beach, Laguna Niguel, Ladera Ranch, Mission Viejo, Orange County and all of California
Here’s the legal scuttle:

• Up-front mortgage insurance premium (hereafter called MIP) increased 75 basis points to 1.75%

Effective April 9, 2012

Annual Mortgage Insurance Premium (MIP) on loans up to $625,500

• Annual MIP increased 10 basis points

LTV ≤ 95% to 1.30%

LTV   95% to 1.35%

Effective April 1, 2013

Annual Mortgage Insurance Premium (MIP) on loans greater than $625,500

• Annual MIP increased 5 bps

LTV ≤ 95% to 1.50%

LTV > 95% to 1.55%

Annual Mortgage Insurance Premium (MIP) NOW Non-Cancellable

• For loans with application dates on or after June 3,

2013, Annual MIP will be collected for the life of the loan, up to 30 years.

• Annual MIP collection had ceased when loan balance reached 78% of original property value.

Effective June 3, 2013

Seller Concessions

• Reducing from 6% to: greater of 3% or $6,000

• Capped at actual allowable costs

• Allowable costs are more restrictive: now disallows homeowner/condo association dues, interim interest and payment protection insurance

Indemnification becomes an issue for lenders to certify:

• Lenders must indemnify FHA against loss for all loans found with:– fraud or misrepresentation, that lender “knew or should have known about”; and/or – serious and material noncompliance with HUD requirements that would make the loan ineligible

• No appeals process or negotiated settlements permitted

Final Rule Issued January 25,

• Compare Ratio Changes:

– No longer compare to national FHA default /delinquency rate

– Mortgagee’s 24 month default/delinquency rate compared to the average rate of all FHA mortgages   only in the state(s) in which the mortgagee operates

• Automatic termination if compare ratio is greater than; 150%

• Automatic termination applies to the institution level of the mortgagee, as opposed to its branches

January 25,2012 (Federal Register /Vol. 77, No. 16)

While the FHA has been a key player in the mortgage industry, the ongoing policy changes were made to strengthen capital reserves—pricing and guideline adjustments, lender enforcement etc.

These changes have a significant impact on the higher cost to close an FHA loan, more careful scrutiny and less appealing product to close a home loan. Someone has to pay and it is going to be on the backs of lower down payment, lower credit score and first time homeowners.

 

 

So what’s my solution? 
Where is the Steel Magnolia this Spring in Orange County?

It is blooming right here in Newport Beach. Borrowers enter my credit counseling program prior to making an offer, they gather more down payment to make a solid offer and save money doing a conventional loan with MI. It will be a less costly option to buy a home in O. C.

Caroline Gerardo
NMLS # 324982
Mortgage Banker
(949) 784-9699
http://mywjb.com/caroline-gerardo/