FHA Changes - Guidelines Tightening (Update 12/3/2009)

Shawn Donovan is the Secretary of Housing and Urban Development, also known as HUD. This group is oversees the guidelines and finances of the Federal Housing Administration, also known as FHA. Since the collapse in the mortgage industry; Fannie Mae, Freddie Mac, and FHA have been responsible for more than 90% of all mortgages this year.

When considering purchases only, I would estimate 70% of the purchases being financed through FHA in 2009. FHA has been feeling the pain of the economy and mortgage industry just like every one else. Deliquencies are at an all time high and their reserves are extremely low.

Mr. Donovan held a press conference yesterday and discussed several issues and how they plan to address them. They did not release all the particulars, however, here is what they are reviewing and looking to change:

1. Increasing the minimum down payment for buyers, which is currently 3.5% of the purchase price.
2. Reducing the seller concessions from 6% down to 3%. Seller concessions is a term used for seller using their money to pay the buyer's closing costs.
3. Increasing their up front MIP and annual MIP. This is insurance the buyer pays for not going with a conventional loan and putting 20% down. The current premium is 1.75% up front, which can currently be financed into the loan, and .55% annually. The annual premium is paid monthly and included in the mortgtage payment.
4. Increasing minimum credit scores. Currently FHA does not require minimum credit scores, however, most lenders have credit overlays that require scores to be anywhere from 580-640.

If you or anyone else you know is looking to purchase a home in the near future and may be affected by these changes, it is recommended that you act quickly before you are affected. Rates are currently extremely low and the government is still offering the tax credit until April 30, 2009.

Here is the article from Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahaqm8RHB79M&pos=4

For all your purchase and refinance needs, feel free to contact me at 410-248-1762 or bob.lowery@prosperitymortgage.com. I am available seven days a week.

Confidential applications can also be completed on our secure website at https://www.homeloans.com/bob-lowery

Regards,

Bob Lowery

Home Mortgage Consultant

Prosperity Mortgage Company

410.248.1762 Tel

443.653.1720 Mobile

Bob.Lowery@prosperitymortgage.com

https://www.homeloans.com/bob-lowery