Recap On The Mortgage Market..

With the growing popularity of the FHA loan over the last 3 years FHA's financial strength has weakened. An actuary study concludes that for the first time since 1994, the capital ratio has fallen below the required two percent level and over the next year you will see FHA taking steps to increase and strengthen their financial position.

Current Changes:

- Credit Tradeline requirement was 2 tradelines of 12months or more has now changed to 3 tradelines. 2 of 3 can be alternative tradelines must be at least 12months.

- Title seasoning requirement of 90days has been removed effective today 2-1-2010 and will be in effect for a fiscal year unless otherwise cancelled by future mortgagee letters. Where you will start seeing issues is if the purchase price for your borrower is more than 20% above what the current seller acquired the property for. We will need more documentation such as receipts and pictures for rehab to justify the increase FYI..

Upcoming Changes:

- Mortgage Insurance premiums set to rise from the current 1.75% to 2.25% effective 4-5-2010 Since this is financed to begin with it will not really effect your borrowers payment by much. (EX: $100k loan at 5% 30yr fixed the payment will rise by $3/month)

- Total allowable seller concessions reduced from 6% to 3% Will be released in a mortgagee letter later this month with a commencement period and going into effective in the summer of this year.

- Minimum fico going to 580. Currently the investors have an overlay guideline of a 620 and some going to a 640. This is really important if you have an approval on your borrower at a 620 right now but are working with short sales you stand the risk of losing the 620 approval from the lender. Your best bet would be to counsel your borrowers on how to improve their credit so there are no surprises later down the road. This is also set to be released this month and go into effect in the summer.