FHA Continues to be Safe Mortgage Lifeline

Federal Housing Administration chief David Stevens has recently announced on a prominent radio talk show, that his agency has doubled the amount of approved loans in the last fiscal year over the previous fiscal year.

He stated that FHA focus will continue to be on owner-occupant borrowers, and its requirement that applications be fully documented. “We don’t do investment properties. We only do 30-year, fully amortizing, fixed-rate mortgages, and every loan is fully documented, so when we approve a borrower, we know their ability to repay that loan has been verified.” 

He failed to discuss talk in the media, of reports that lawmakers having many concerns whether FHA is getting over-extended, or whether the safety measures the agency just rolled out several months ago, are going to work or not work.

Those new measures include:
Requiring borrowers with a credit score of 580 or less, to put up a minimum of 10 percent down, and to pay much higher mortgage insurance premiums.
For those borrowers who have credit scores higher than 580, the down payment remains at 3.5 percent minimum.
  
It’s too soon to tell what impact those new changes are having as of now.

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Not-So-Free Credit Reports

I read an interesting article recently and immediately thought about the wellbeing of my clients regarding those ‘so-called’ free credit reports that are advertised on radio and TV, 24 hours a day. The article was published in the N. Y. Times and essentially discusses the fact that most of those ad-spots, if not all, offer credit reports to people, for a price, and are not free. The article was written by Ron Lieber.

Lieber writes: “new FTC rules went into effect on April 2, and they require sites to include a prominent notice across the top of each Web page that mentions free reports, declaring that the only authorized source, under federal law for such reports, is www.annualcreditreport.com.” 

The rules are aimed at sites like freecreditreport.com, which has been enticing people into a $14.95 per month credit-monitoring service with the promise of a free credit report. Experian, which owns freecreditreport.com, is pretty clear about its offer; it’s upfront about the fact that you’ll be enrolled in the service and that you have seven days to cancel. Still, the tactic must be pretty lucrative. To avoid having to include the FTC notice, Experian is charging $1 for reports and giving that money to charity.

The author of this article makes a good point and the message is clear:
Before you order a credit report that you think is going to be free, make sure you are aware of what you are ordering, and the possible costs involved.

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FHA Loans

Be aware that if you are planning on applying for a FHA Mortgage loan, you will need a FICO score of 580 for the 3.5 % down program. You will be denied all program loans if your score is 500 or less. The underwriting criteria  is also more stringent.

Good or bad, this is all a reaction to the Real Estate problems of the last few years. Which were caused by the lax policies of Fanniemae and Freddiemac.

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Congress Passes Financial Reform Bill

There was a financial reform bill passed by Congress last week that is meant to protect the borrower from mortgage loan abuses. The ironic thing is that the offenders/lenders that this is geared toward no longer exist.

Listed below are just a few items in the contents of the Bill.
• Requires lenders to ensure borrowers have the ability to repay a home loan.
• Restricts prepayment penalties and the fees to brokers for steering borrowers to higher-priced loans.
• Mortgage applications will be simpler and easy to understand.
• Stricter requirements will apply to some types of mortgages—including negative amortization.
• The bill will limit points and fees to 3 percent of the total loan amount.
• Prepayment penalties are tightly controlled and end three years into the loan.
• And a new consumer protection agency will be established to spot and eliminate abuses of the home-lending business.

Someone is going to have to pay for the expenses occurred by the lender in meeting these new requirements, no doubt the cost will be passed down to the consumer.

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New Signs of the Market Growth

A survey conducted by Campbell Communications, shows that short sales account for 12.5% of property sales in July 2009.

A short sale is when a property sells for less than the existing mortgage. This is often done so the homeowner can avoid foreclosure. These sales are more time-consuming and complicated. Thus agents need to be experienced and educated on how to assist homeowners in these situations. I would suggest  you need assistance in this process.

We will be seeing more and more short sales as the market continues to adjust as more consumers take advantage of the government’s Home Affordable Foreclosure Alternatives program. This program streamlines the short sale process, making it simpler for the seller, buyer and the mortgage holder.

I would be privileged to explain and then assist you in this process of either selling or purchasing a new home.

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