Laura Borja San Diego FHA VA Jumbo Loan Expert

FHA guidelines changes on collections and self employed borrowers

In a Mortgagee letter issued on February 28, HUD announced new FHA Loan guidelines pertaining to open collections as well as requirements for Self Employed borrowers.

All of these FHA loan guideline changes are effective with case numbers assigned on or after April 1, 2012.

Self-Employed Borrowers:

A Profit and Loss statement and Balance sheet will be required if more than a calendar quarter has elapsed since the filing of the borrower’s most recent tax return. In addition, if the income being used to qualify the borrower exceeds a two year average of the tax returns, then an audited P&L or signed quarterly return will be required ……….. What this means: if a client files his/her tax returns on Feb 15, then a P&L will be required beginning on July 1^st. If the tax return is filed on April 15, then the requirement would apply as of October 1^st. This could be an issue for anyone whose business cash flow is seasonal and tends to be heavier in the later part of the year.

Collection accounts:

The new FHA Loan guidelines require that if the total balance of all collection accounts is equal to or greater than $1000, the borrower must resolve the accounts. This means that providing proof that the account is paid in full or the account must be paid in full at closing OR borrower may provide proof of a repayment agreement with the creditor with verification of timely payments for a minimum of three months

If the total balance of all collection accounts is less than $1000, the borrower is not required to pay off the collection account.

FHA will continue to require judgments to be paid off in order for the borrower to be eligible for an FHA loan regardless of the balance of the judgment.

Bottom line:

If you have a client who knows they have outstanding collections, have them work with an experienced lender who can help them deal with their credit issues to prepare them to become a homeowner.

If your client is self-employed and looking at purchasing a home late in 2012, be sure to have them discuss their income flow with an experienced lender to make sure there is no qualifying issues.

Whether your client has a credit, asset or income issue... or no issue at all, it is always a good idea to put your client in touch with an experienced, reliable lender to guide them and ensure their journey to homeowership is as smooth as possible

FHA announced changes to Mortgage Insurance for FHA Streamline Refinances

The newest Mortgagee Letter issued by HUD on 3/6/12 not only addressed the upcoming general changes to mortgage insurance premiums previously accounced in a press released, but also included changes on the mortgage insurance premiums for certain FHA Strealine Refinances.

In the past, any refinance, whether it was a fully documented refinance or a streamline refinance, was subject to whatever Up Front Mortgage Insurance Premium and Annual Premium factors were in effect at the time the new case number was issued.

In many cases, that mean that taking advantage of the current low rates was nearly impossible since the FHA mortgage insurance premiums have increased considerably Increased considerably in the past 3 years. That meant that any advantage of having a lower rate would either be complete erased by the higher monthly mortgage insurance figure or at the very least, make it so that the cost of refinancing was too great for the drop in total payment.

Effective with case numbers issued June 11, 2012, anyone utilizing the FHA Streamline Refinance option to refinance a loan endorsed on or before May 31, 2009 will be subject to specific Annual Mortgage Insurance Premiums and Upfront Mortgage Insurance Premiums.

FHA streamline refinances meeting the criteria for the endorsement deadline and with a new case number on or after June 11, 2012 will have an UFMIP of .01% and an annual MIP of .55 regardless of the base loan amount.

The lender obtaining the new case number will need to confirm the endorsement date of the FHA loan being refinanced as it is not the closing date, but rather the day FHA issued the insurance guarantee on the loan.

The lower mortgage insurance figures will open up refinance possibilities to many homeowners, who up to now, have been unable to take advantage of the low mortgage rates available.

California Homebuyer's Downpayment Assistance Program (CHDAP) Announces changes

the California Homebuyer's Downpayment Assistance Program (CHDAP) is one of the programs offered by the California Housing Finance Agency (CalHFA) to assist First Time Homebuyers in purchasing a home.

The recent changes to the program will expand the number of qualified applicants by eliminating the minimum borrower contribution and including Loan Prospector as one of the allowed methods of Automated Underwriting.In addition, the limit of $417,000 for the first mortgage has also been removed.

Highlights of the California Homebuyer's Downpayment Assistance Program (CHDAP):

• Borrower's must be first time home buyers (can not have had an ownership interest in any principal residence during previous three years)
• Property being financed MUST be a principal residence and must be owner occupied for the term of the loan
• CHDAP can be used for down payment assistance or closing cost cost assistance
• CHDAP loan will be 3% of the sales or appraised value, whichever is less
• CHDAP is a deferred payment junior lien with an interest rate of 3.25%
• Borrower must meet set income limits based on the county property is located in, program being used for the first mortgage and number of persons in the household
• Sales price of the home can not exceed the sales price limit set for the program
• No set minimum contribution by borrower however, the guidelines for the first mortgage must be followed (i.e. FHA requires 3 1/2% down, therefore the borrower would still need to contribute 1/2% to complete the down payment requirements)
• Loan must tbe repaid at the time of sale, transfer of title, payoff or refinance of the first mortgage or upon formal filing and recording of a notice of default

The California Homebuyer's Downpayment Assistance Program (CHDAP) is an excellent tool that in combination with the right first mortgage and seller contribution can help a First Time Home buyer aquire a property without a large monetary burden.

The list above is not all inclusive of all the features and requirement of this Down Payment Assistance Program, however, it does provide you with some general guidelines.

What do the FHA MI changes mean to the buyer's monthly payment?

HUD is presenting the increase to the FHI MI premium as something that will have nominal effect on a buyer's monthly payment, but is that the case?

I suppose it's subjective depending on what one considers to be nominal. The calculation above shows that the increase in the FHI MI premium will result in a difference of $39.62 which is just over a 3% increase in payment.. Some may think that it's nothing in the big scheme of things, some will think that represents their daily latte which they can not live without. And for some, that means that they could be $90 short on income to qualify!

Only time will tell how affected the market will be by the changes, Just another bump on the road to homeowership for some.

FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES- New preimum structure is meant to help protect FHA's MMI fund.

A press release was issued on Monday February 27,2012 by HUD announcing the changes ahead of the Mortgage Letter being issued. This is a recap of that press release.

In an effort to strenghten the FHA Mutual Mortgage Insurance Fund, FHA will be making changes to it's premium structrue for FHA insured loans

Effective with case numbers assigned on or after April 1, 2012.Up Front Mortgage Insurance Premium (UFMIP) will increase from 1% to 1.75% of the base loan amount. The incease applies regardless of the LTV or loan term. In addition, the annual premium on which the monthly MI figure is calculated will inrease by .10%.

In addition to the changes above, effective with case numbers assigned on or after 6/1/2012, the Annual Premium for mortgages with balances of $625,500 or higher will increase an additional .25%

Feel free to contact me with any questions on this change or any other lending questions you may have.