FHA making Dramatic Changes

This is an email I just received from Kevin Downs, he is a Lender with Guaranteed Home Mortgage Co., Inc out of York, PA. We are currently working on an FHA 203k loan, and I'm very impressed with his responsiveness, and ability to stay ahead of the game, especially considering our Nov. 30th deadline and the difficulty of closing this loan in a short period of time. God willing we'll get it done by our deadline. *fingers crossed* I'm sure Kevin is doing all that he can. That being said I thought this information was certainly worthy of passing on, and he gave me permission to do so....so here you go..

FHA is making dramatic changes to their guidelines as of January 1 2010. Please do not get caught saying “how did my lender not know this”. Listed below are some highlights of the anticipated changes and what they mean to you and your customer.

There have been all kinds of rumors about the changes FHA are making for 2010, so I wanted to give you a condensed version of what are the most important ones.

The No. 1 change is how FHA certifies it lenders. FHA is getting rid of what they call the mini eagle. (Guaranteed Home Mortage Co or GHMC is a FULL EAGLE and MEETS AND EXCEEDS ALL REQUIREMENTS) GHMC is a Mortgage Bank however most brokers operate under this mini eagle status. They had to be approved by FHA and have a certain net worth. The lender now called “the funding source” has to maintain FHA certification not the mortgage broker. This is good news for the mortgage broker, lenders and consumers as it will ensure competition and more access to FHA loans.

The funding source or the lender must have a minimum and audited net worth of $1 million. (This will eliminate most small questionable brokers) The funding source must submit an audited financial statement to FHA every year to verify they meet this criteria. It is believed that the net worth will only go up in the future.

FHA is really looking for lenders to have some “skin in the game.” FHA is seeking to ensure they have enough capital available to compensate FHA if their loans fail to meet FHA standards. This will tighten supply as the lenders will become more conservative when making decisions on approving a loan. They will have some responsibility on the performance of the loan. FHA is looking for lenders with deep pockets.

They are also making changes to a FHA streamline refinance. Currently if you have an FHA loan, you can refinance to lower your rate, with just an application and a verbal verification that you are still employed. They do not make you document your income or assets. Basically the new streamline transaction must now be a fully documented loan. They verify your employment and assets. An appraisal will be required if you want to add your closing cost in the new loan. This will also tighten supply and slow down the refinancing process for the consumer.

What about the appraisal process? Yes, we will be going to the same system Fannie Mae and Freddie Mac are using, the dreaded HVCC system. This will slow down the process and add more cost into the appraisal which they will be passing on to you, the consumer. The appraisal will only be good for up to four months.

FHA has been a great product over the years and has been a stabilizing factor in today’s real-estate market. It still allows the consumer to obtain a home with only a 3.5 percent down payment. With prices affordable now, first-time homebuyers account for nearly 40 percent of all sales.

WHAT DOES THIS MEAN:

The FHA continues to be a great loan resource. Please allow me to anticipate the changes with the guidelines and make sure you and your customer do not suffer. Remember, November 30^th is the cut off for the tax credit. As of today there is no bill passed that will extend it. There is a bill in Congress, but believe it or not it is meeting resistance. Lets all keep our fingers crossed. Now is not the time to be hedging your bets on brokers.

Below is Kevin's contact info if you're local or semi local and need a loan give him a ring.

Kevin Downs

Guaranteed Home Mortgage Co., Inc.

500 Greenbriar Road

York, PA 17404

717-542-3109 mobile

717-779-0500 office

717-779-0800 fax

888-846-6304 toll free