I know a lot of folks are looking for a list of banks participating in the HAMP and HAFA program. You can find that list on the Making Home Affordable webpage.
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I received a notice from a loan officer today, giving an update on the new FHA changes. The Policies are an attempt to make FHA more stable in this economy. Evidentially, the FHA is running out of money. As with many of the Government’s fiscal policies there seems to be these significant changes once they realize they are in trouble. Instead of seeing this issue coming and making slow constant changes to correct, we receive these new police changes.
The actually influence it will have on buyers is yet to be seen, but the mere fact that Seller concessions are now limited to 3% of the sales price, instead of 6% will significantly impact many first time homebuyers. Most first time homebuyers do not typically have extra cash on hand for all the closing costs.
The change for an acceptable credit score of 580 and allowances for lower credit scores if lower than 580 are move to broaden the buyer base.
The rest of the changes involve increased performance supervision of the individual lenders. This is really something that I think we would have all liked to have seen since FHA’s inception. More and more we’re hearing of FHA taking away lending permissions because lenders aren’t abiding by the regulations. This new focus on oversight is a good start.
From the Lender:
FHA ANNOUNCES POLICY CHANGES
FHA Commissioner David Stevens announced a set of policy changes. The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement.
Announced FHA Policy Changes:
Mortgage insurance premium (MIP) will be increased.
In an effort to build up capital reserves and bring back private lending MIP is being increased. The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP. Update the combination of FICO scores and down payments for new borrowers.
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%. 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 was included in one of the two Mortgagee Letters issued on January 21st, and is effective immediately.
More lender accountability with the risk of losing their ability to offer FHA loans.
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.
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