Ok, I learned something that I was not aware of until recently and thought I would share with everyone.
Recently (during the last 6 months) I switched to a different mortgage company. In my prior life, I worked for one of the big box lenders who we did about 98% of all our loans in house. What this means is we the lender would originate the loan, process it, underwrite it, sell it to an investor and retain servicing rights to our loans. Since the amount of mortgage production this company did was huge, they could take a little more risk on some of the FHA loans they approved. I never understood this fully until I recently made a switch.
My new company has a different business model. We originate the loan, process it, underwrite it and then sell it to an investor on the open market for sale. With guidelines tightening, investors are being very careful with what type of loans they will and will not buy. This has even bleeded into FHA loans.
Now I always thought that an FHA loan is an FHA loan. Hud has certain guidelines and criteria that need to be met and those guidelines are followed to the hilt. However, an investor can make a decision if they want to buy certain FHA loans or not. They do not have to buy the FHA loan even if it meets the program criteria. This usually comes into consideration when we have a client that does not get an automated loan approval. This forces the loan to goto a manual underwriter, who makes the final decision. Most investors will buy the loan if the lender gets an automated approval.
Just thought I would share this great information about FHA loans.
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"investor quality" is what we call it. while many/most investors will openly state that they strictly adhere to hud quidelines their practical application may not support that.
Yeah, evidently there are different "bands" of quality in FHA loans from the secondary market buyer's perspective. Good post.
Bill- Yes it does make all the difference
Peter- Let me try and answer this as best as I can. 1. YSP is allowed. 2. I am not sure if there is a specific limit. I never gauge a loan on these terms. Rates and costs have to be competitive, or else another lender will earn that business. I am not 100% sure if FHA adheres to Predatory Lending Guidelines, but I am sure they do. I personally have never charged more then 1% origination and 1% discount (buying the rate down) on an FHA loan.
Jay- I might borrow the term "investor quality". Its so true.
Seth- We learn something new everyday.
Gary.... I agree and disagree with some of this. Yes, you could follow the FHA guidelines and the investor can still say no. We are a mortgage banker with the ability to broker loans. If we have an investor that won't buy it, we have others to pick from or just broker it. Sure, there can be a pricing issue, but rates have been holding.
We are underwriting some FHA that some have not been able to do. But our investor just makes sure that it's all put together. They really don't question our underwriters because we have a very good record with FHA. Just some food for thought. But yes, some investors can still say no...basically busting your balls, if they don't want to buy it. Good information here....
Jeff- Question back to you. Are you saying that it could be just the investors that our mortgage companies bundle and sell the paper who are being difficult. So if I cannot get it done in house but I am 100% it meets FHA guidelines and requirements, I could broker it. I think that's what your telling me. Please confirm if possible. That will open up more opportunities and help more of my clients. Thanks, you learn something new every day. Great comment.