Underwriting Guidelines Too Tight?

December 22, 2012 by Leave a Comment

On Shaky Ground??Ben Bernanke, is they guy a lot of people on Wall Street like to hate these days.  They blame much of the problems with “future” debt amassing on his shoulders.  Weather you like him, or you hate him – there’s no denying he is setting Financial Policy for the future – and he’s impacting mortgage Interest rates.

In his speech at Operation HOPE Financial Dignity Summit in November, he discussed the challenges facing the housing market and mortgage lending.  One of the challenges that Chairman Bernanke commented on, was a Mortgage Underwriting Standard that he believes might be headed in a direction that is going to put further pressure on a weak system because it’s become “overly tight”.

“…Some tightening of credit standards was an appropriate response to the lax lending conditions that prevailed in the years leading up to the peak in house prices. Mortgage loans that were poorly underwritten or inappropriate for the borrower’s circumstances ultimately had devastating consequences for many families and communities, as well as for the financial institutions themselves and the broader economy.

However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.’ [Read more...]

Filed Under: Housing News Tagged With: , , , ,

FHA Says Okay to Buy a Flip

December 4, 2012 by Leave a Comment

get married buy a houseOur son recently purchased his first home – and it was a home someone purchased, fixed and decided to Flip.  Being in his 20′s, he had no time or knowledge to fix the issues with the house by himself, and the “fixed up Flip was PERFECT for him!  Traditionally, FHA made a home buyer wait at least 9o days after a property changed hands before it was eligible for a new FHA loan.

Last week, FHA realized that this type of property is still one of the important choices available to home buyers - and extended a rule that made it much easier to purchase a “flipped” property and take advantage of the FHA program.  Makes sense… think of it this way – a home goes into Foreclosure, the bank takes the home… and with the “traditional” FHA Flip Rule, no one could buy the home for ANOTHER 90 days! [Read more...]

Filed Under: FHA Mortgage Loans Tagged With: , , , , , ,

FHA Says: Pay Off Disputes Over $999

March 27, 2012 by 1 Comment

pay off collectionsFHA Announced a BIG Change that will take place this summer.  According to the FHA Mortgagee Letter 2012-3, beginning July 1, borrowers with ongoing credit disputes totaling more than $1,000 will have trouble getting an FHA Mortgage loan.  (This date has been revised and HUD is seeking comments on the ruling)

This is a HUGE change, because for the last 20 plus years, you could pretty easily get an FHA mortgage, without paying off medical collections.  Now, even if you have 740 credit scores – if your total disputed accounts add up to $1000 or more… all collections and disputed accounts will need to show payment arrangements, and on time payments for these accounts must be documented for at least 3 months.

The rule marks a significant belt-tightening of the FHA guidelines.  Before this rule,  our Bank Underwriter could determine if any of the borrower’s outstanding debts should impact the approval of the FHA-backed mortgage.  One New Home Builder estimated that this could affect as much as 65% of the buyers in their community.

It is unclear what documentation the FHA Underwriters will accept to show that the account is being paid as agreed.  Meaning that, some underwriters might want the payments to show on the credit report (not accepting cancelled checks) and others might want an additional statement from the collection agency, or an updated credit report.  FHA gives guidance on all 3 ways to verify the accounts, but each Bank will likely create their own Underwriting Guidelines for this new ruling. (See Page 3 Mortgagee Letter 2012-3)

[Read more...]

Filed Under: credit, FHA Mortgage Loans Tagged With: , , , ,

FHA Seller Repairs Required

December 13, 2011 by 2 Comments

If you are interesbuying a foreclosed home in ncted in purchasing a distressed home, or one that’s been foreclosed upon, it probably has some “deferred maintenance items” that need to be done.  Getting the Seller to DO those items, however, is normally difficult.  So the question becomes, what will FHA let you leave undone, while still giving you an FHA Loan on the home.

Here’s what we’re seeing with some “unique” foreclosed Bank Owned Properties and  “handyman specials” in December of 2011.

Un-permitted Improvements: 

In the last year or two, we’ve seen a couple of situations where a Seller has finished off a bonus room, upstairs, or converted a garage into a living space.  If this was not properly inspected and permitted, that space will not be calculated in the value of the property.  Sometimes, non-permitted additions and remodels are not completed to code.  For instance, if the garage conversion doesn’t have adequate heat or insulation, the FHA appraiser / underwriter may require that these items be brought to code. [Read more...]

Filed Under: FHA Mortgage Loans Tagged With: , , , ,

Qualifying For A FHA Streamline Refinance

December 13, 2011 by 8 Comments

FHA Streamline refinanceFHA changed it’s guidelines so that VERY little is required to qualify for a FHA Streamline Refinance, however, in North Carolina, we have our own State mandated standards, so again – many of the NC Banks can not offer this program the way FHA intended for it to work – WE DO!

FHA says that to qualify:

  • Employment verification is not required with an FHA Streamline Refinance
  • Income verification is not required with an FHA Streamline Refinance
  • Credit score verification is not required with an FHA Streamline Refinance* (See notes below regarding AUS findings)
  • A new appraisal is not required with an FHA Streamline Refinance


[Read more...]

Filed Under: FHA Mortgage Loans Tagged With: , , , , , , , , ,