As many of you are aware, the mortgage industry has been going through some major changes in the last 6 months. Well, get ready for some more changes. In my honest opinion, many of the changes are for the worst. Sorry, but it's reality and we need to pay attention more than ever.
I am going to list the important changes next. I will list from the most important to least, but based on my opinion.
1. Seller funded downpayment assistance programs - Know as DPA's or Downpayment assistance programs. Seller's can't participate as of October 1st, 2008, unless the borrower is approved prior to this. FHA confirmed the definition of "borrower approved" by stating that cases run through the FHA scorecard, eligibility will be determined by the date of the last scoring time. For manually underwritten loans, the eligibility will be determined by the date of the underwriter's signature on the MCAW or the loan transmittal form. ** Ask your loan officer for definitions in what was just mentioned. ** FYI - Even though the new bill was passed by Congress, Bill HR 3221, there is a new bill that will hit the floor soon to oppose the banning of DPA programs.
2. Cash Investment from borrower - Not only do they kill the DPA program, which helps buyers to purchase a home with little or no money out of pocket, but HUD now raises the cash requirement. The previous requirement was 3% from the buyer and the new investment from the buyer is now raised to 3.5%. FHA should be publishing a mortgagee letter in the next 30 to 60 days and this should go into effect on January 1st, 2009. My opinion? It's tough to save as it is. On a $200,000 property, the buyer will now need an additional $1,000. You will still be able to get 100% gifted to you by a relative and still be able to get 6% seller contributions.
3. Risk base pricing - FHA is going back to the old method of upfront mortgage insurance premiums. The new changes were mentioned here : http://www.fhaloansfhamortgages.com/fha-mortgage-insurance-new-risk-based-pricing-guidelines-effective-07-14-08 So, FHA will be going back to the old method, which is just one calculation. This will go into affect with new FHA case numbers assigned on or after October 1st, 2008.
4. Mortgage Limit Decrease - As many of us know, when the Stimulus package was approved and signed by the president, FHA loan limitswere increased, but only up until December 31st, 2008. The mortgage limits will be lowered in high cost areas to 11% of the area median sales price up to a maximum of $625,000. HUD is still trying to decide whether it is $417,000 across the board, $417,000 "floor" and higher limits in high cost areas or $625,000 across the board.
Overall, as you can see, there are some important changes in the mix. And in my opinion, this will hurt real estate more than help it. But nothing is confirmed until FHA publishes their mortgagee letters to reflect the changes.
For those that of you that want to help save the DPA program, Gerry Suarez wrote this post. http://activerain.com/blogsview/621419/we-have-one-more Please read this and vote, let your government officials know how you feel. Voice your opinion.
____________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
You are absolutely correct, the changes will not be a benefit for America. I think that if enough of us keep saying this, maybe, maybe, maybe some one in government may read it, but am not holding my breath.
Jeff, this is right on the money that it will hurt and hurt bad. The changes couldn't come at a worse time and will severely disrupt some markets.
FRED...... I know that making a statement in numbers certainly can help.... but do many of these politicians have their heads up their butts so far that they just can't realize any of this? I am now going to send this and my previous blog, http://activerain.com/blogsview/629732/Buckle-up-you-think, to some politicians.
MARK...... I agree, the changes couldn't come at a worse time. It sometimes makes you wonder what these people that have this control to change things, what they are thinking.
Jeff, good iniformation and clarification of the details of a very complicated mortgage space we are in. Moving targets are hard to hit. The job of a good professional is provide clear and concise understanding of the details.....nice post
Glad you are back!
Bo
Thanks for sharing and clarifying some things, this was an informative post!
Thanks for the info, Jeff! Nehemiah also has a very easy way of contacting Congressmen and Senators from your own area at: www.getdownpayment.com. We ALL need to take a minute and ACT NOW!
Jeff, I don't know your take on re-blogging....but I would sure love to re-blog this to my local area for my consumers. You can go back on previous post and check the re-blog box and then we can all distribute your expertise....you get the credit...we just spread the distribution. I check back to see what you think!
Great post Jeff. I couldn't agree with you more.
BO.... thanks for the compliment and for the welcome back. I had to take a break from AR and from blogging.... but yes, it can be hard to stay on top of this stuff. And little bullitens as this one can help most stay in tuned to what is happening. thanks
HEATHER..... my pleasure and thanks for stopping by. By doing a post like this, it also keeps me on my toes.
SHERRI....... yes, both Nehemiah and AmeriDream have links to protest Congress's decision on banning DPA programs... thanks
JEANEAN..... it's up in the air. Yes, I believe it could give you more exposure. But, at the same time, most people don't read the small print, they read the blog and the author's name. But yes, I will re-blog this one. I did try it and it's not working on my end. I read some where that there still might be some bugs until tomorrow. Thanks for asking.... look for it later today or tomorrow.
BOB...... thanks and thanks for the compliment.
Jeff,
Great post and thanks for the mentioning mine. You have saved me a TON of research as I had not had all those dates yet. You rock! It is unfortunate Congress felt the need to hamstring us like this. Many loans will be more challenging and some just won't be done under these new guidelines.
I must admit there doesn't seem to be strong support for the new bill reinstating SFDPA's. It seems many people in our industry have bought into the idea that a loan without down payment is a bad loan. Go figure- I guess VA and RD are to be considered "the next subprime"?
Thanks again for the great post!
Gerry Suarez, Jr.
Your HUD Loan Pro!
GERRY........ my pleasure and thanks for the polite compliment. And yes, we need more people that do believe in the DPA's to stand up and make their voice heard. And not just to cave in. This will hurt business overall. I was looking at my numbers for this year... DPA's were about 20% of my business.
On another note, those in our industry that have bought into the idea that they programs are bad.... wow... they need to wake up and read through the numbers. To truly understand why these would fail and not just because the gov't said so.... thanks for your input.
tHEY ARE RIGHT. GREAT POST.
Jeff, thank you for the very informative post. With the industry today it seems harder than ever to keep up on the minute to minute changes that are occuring and still try to get my day to day work done. I appreciate the help any way I can get it.
In my mind, the industry just loosened its belt so much the last few years that there is an OVER-correction taking place right now to combat the bad loans. Hopefully this is just temporary and everything works itself out.
A good post jeff! Hopefully, there will be new legislation before this comes to pass.
Thanks, Jeff -- you laid out the "new world order" of home financing. I guess my REO business will be growing rather than diminishing! God bless you!
Jeff, I agree with you this makes things tougher no down payment assistance and now they want an extra .50% down that makes it tougher for first timers for sure. It indeed is going to get tougher out there.
Thanks, Dan Chapman
"my mortgage business is in the tank but I found something better"
Hi Jeff - I am a residential appraiser of 14 years - and with 8 years of FHA experience - I am wondering how you are finding current appraisers entering the FHA arena with regards to experience and competance? I am in the central Florida area - and I just went to reinspect a home today. The lender wanted the inspection date to be AFTER the case # issuance date. I reminded them this was not necessary per FHA/HUD - but they indicated they needed this to be in compliance with their own internal guidelines.
When I told the processor I needed to reinspect she replied "other appraisers just change the date and send it in. But whatever - I need it updated so please do what you need to do".
I felt sadness that "other appraisers" are imposing HUGE liability upon themselves and the lender by this practice and it made me wonder how many inexperienced FHA appraisers we now have in the field.
I'd love to hear of some of your experiences with appraisers in connection to FHA assignments?
Richard Ferris - AmcAppraisalsinc.com - Fl St Cert RE Appr #RD4088
Some very good information, Thanks for keeping us updated.
Have A Great Day
I dont understand why alot of you are saying its so bad for us. we all knew it was coming eventually. I mean it was out of control. I remember seeing deals where the house was inflated because of down payment assistance programs. I think this will stabilize the market with people that can afford their house payment. Im sure people have been raising caine on this issue for few years. Only time will tell o see what happens.
RICHARD... what's right? In any case, thanks for the polite compliment.
MARIE.... my pleasure... at times, because I am so busy, it's even hard for me to keep up with a few things... lol I try, but hence one reason why this place is great.... so much good information with good updates. The problem is that you need to know which ones are correct and accurate. This is a big pet peeve of mine, which I will be writing about soon. thanks
CASEY..... bingo... over-correction. And the government needs to let most things correct itself. I think with the banning of the DPA programs, that they are shooting themselves in the foot and everyone else with them.
JOHN...... thank you very much. I hope so to... thanks
TERRY..... that is a good point. If you specialize in REO's, then it could become huge. Just that so many banks don't know what they are doing on that end of things, which have either delayed the transaction or killed it at the end. Sad....good luck with it.
DAN..... Yes, this will hurt. Not sure how so many think that 3,5 % into a transaction is going to help keep the foreclosures down.... You said, your business is in the tank, but you found something better? What was that? thanks
RICHARD.... in regards to new appraisers entering the FHA arena? Not sure, because everyone that I use, have been doing FHA for a long time, since the 1990's. But I can see your point in regards to the lenders. So many lenders have also entered the FHA arena and have no clue. Some making up their own rules, just to cover their arse's. It is getting tough out there... thanks
DORIS...... my pleasure and thank you & thanks for stopping by.
HAROLD.... come on, be honest. Bad is bad, but define bad. How bad? Yes, we can sit here and say, we knew it would get bad.... but again, how bad. Unless you have a crystal ball. besides, if you read this, this is a national post per se. Myself? I am doing better this year than I did the last 2 years. Why? because there are less programs out there and not everyone knows how or can do a FHA loan. The average person can only get a FHA loan or that it would be better for them than a conventional loan.... in my opinion.
Yes, it was out of control. But where did it start with? Wacky programs... yes, some. But what about the loan officer that only cared about a pay check? Told the client what ever they wanted to hear or bait and switched them last minute. The blame can be pointed to so many, in so many directions. Thanks for your input.
Hi Jeff - good blog but I think you left off one other thing that I think is worth mentioning and that is the "tax credit" for first time buyers. In reality, it's just a 15yr, interest free loan. Yes, for many first timers who spend nearly everything they had just to come up with the 3-3.5%, this interest free loan will definately be welcomed. However, it is still a loan and it's not available for those who participate in state sponsored programs (i.e. CalHFA here in CA.). For many of my clients, CalHFA and it's dpa program is their only option because they don't have the 3-3.% down. So to exclude this group seems a little wacky since these are a demographic that could definately benefit from this "tax credit".
Very informative post - I really appreciate it. You clarified some things for me.
~Kelli
Change is coming. New political leaders and new ideas will come in the new year and hopefully politicians with common sense will elected and this down cycle will come to an end.
Jeff: I was hoping you might have an update on the Barney Frank sponsored bill that still allows for DPA but it's credit score based. What do you know about this?
Paul
This should be a big concern of all mortgage brokers. Please read Richard Smith's blog and contact your local representative early in the morning, they are discussing this bill tomorrow and hopefully it will get turned around. He has listed all states phone numbers to call on his blog.
Thanks for the info Jeff keep us posted
Hi Jeff,
Good information, I am not a mortgage loan officer but, I do mortgage protection insurance and annunity and I guess supprisiingly our company is booming, I guess people want to make sure that they are well protected. I also do loan mid. for clients so if you have some one you can't get refied less work together to see if we can help. I am do annuity to help clients stop lossing money and recoup some of their loss.
Jeff, thanks for the post, you've gotten a lot of great comments. I did notice that it said 11% of median sales price instead of 110% of median sales price, but great info for everyone to be aware of.
Now that most of the changes have been in effect for a few months and we're coming up on another adjustment (the loan amount from $567,500 down to $506K for King County), I see the changes as relatively small. Yes, some buyers will need to wait a couple of months to save up the extra .5% down payment, and the risk-based pricing (which was put on-hold) will mean people may qualify for a slightly smaller loan or need to work on credit issues for a few months; having said that, it's still pretty easy to qualify for an FHA loan.
If you there are potential buyers reading this blog entry and the comments, I would encourage you to meet with a qualified Loan Originator who has solid experience with FHA loans. Then you can find out how the myriad changes in the mortgage market over the past year may have affected you.
Thanks again for the post Jeff! --James Wirth