Archive for the 'Federal Housing Administration' Category
Selecting FHA Loan Can be a Viable Choice
January 10th, 2012
Written by Frost Mortgage
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FHA Extends Waiver on House Flipping Rules
December 29th, 2011
Written by Frost Mortgage
WASHINGTON (CN) – The Federal Housing Administration will extend a waiver on its anti-flipping regulations until Dec. 31, 2012.
”This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Acting FHA Commissioner Carol J. Galante.
Under regulations adopted in 2003 the FHA does not insure mortgages on houses sold within 90 days of the re-seller’s acquisition, unless that seller meets certain exemptions such as being a government-sponsored entity or nonprofit organization approved to purchase homes owned by the Department of Housing and Urban Development.
The FHA said it adopted those regulations to protect consumers against collusion by mortgage lenders and appraisers to inflate the price of properties to which a speculative buyer has made only superficial improvements, if any.
Since the original waiver took effect in February 2010, the FHA said, it has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.
The FHA said it had research showing that the regulations discouraged sellers from accepting FHA-backed buyers at a time when it needs to do everything possible to promote recovery in the housing market.
By TRAVIS SANFORD
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Economy Notches Some Gains
April 22nd, 2011
Written by Frost Mortgage
The Federal Housing Finance Agency reported that U.S. home prices declined for a fourth consecutive month in February, falling 1.6 percent from the previous month. In March, new data showed that housing starts and residential resales rebounded. Both, though, are off from a year earlier — when the property market was temporarily buoyed by a federal tax credit. The results come as initial claims for unemployment insurance fell 13,000 to 403,000 last week, based on Labor Department reports, and as the Conference Board’s index of leading economic indicators gained 0.4 percent in March.
Wall Street Journal (04/22/11) Ackerman, Andrew; Dougherty, Conor
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IT’S THE LOAN PROGRAM, STUPID……
March 8th, 2011
Written by Greg Frost
As I listen to the talking heads and government policy experts in Washington discuss mandating 20% down payments for future mortgage programs I get sick to my stomach. Aren’t any of these people doing their research before suggesting such a draconian response? Are they not aware that FHA, VA, and USDA have been insuring high ratio (96.5%, 100%, and103%) loans for over 70 years? Are they not aware that, barring a short period of time in 2007-2008, when sub prime lenders successfully crammed some of their loan products into the FHA programs, that these government insured loan programs performed admirably?
Please note, on the attached graph, the default rates, during the 10 years preceding 2007, before the wheels came off the economy. Note how well the Prime Fixed Rate and Prime Arm Mortgages (Fully Documented) performed during that entire decade compared to all other mortgage instruments.
So why doesn’t Washington recognize that it was very specific and easily identifiable loan types that were toxic; eliminate them; and stop trying to make us and our industry out to be outlaws? Their own Federal Reserve Bank of Kansas City shows, in the attached report, that it is the loan program that was the culprit.
I can’t find any of my counterparts who designed those toxic loan programs. We just originated them. So who are the culpable “outlaws”?
The government’s attack on our industry is unprecedented. Why isn’t the government going after the car salesmen who sold all those Toyota’s that wouldn’t stop? Why aren’t they attacking Standard & Poor’s, Moody’s and Fitch who rated the securities filled with those toxic loans AAA? Why didn’t they attack the contractors who installed all the asbestos, or the painters who once used lead based paint? Again, what they are doing to us is patently unfair and unprecedented in scope.
We sell mortgages, we don’t design them. We sold what the mortgage industry, with congressional oversight, provided us to sell. Remember Barney Frank stumping for relaxed guidelines?
Admittedly, during that period of time, most mortgage brokers did not have access to FHA and VA loan products so they sold what they had, which in many cases was not the best product for their customers. Therein lies the biggest problem. The toxic loan programs were so “fast and easy” that mortgage brokers and mortgage bankers alike, shied away from traditional full documentation products in order to facilitate faster approvals, minimize documentation requirements and increase throughput.
When the smart guys who were designing loan programs for, and within our industry, allowed a W-2 employee to use a ”stated income” loan program, they established a scenario for lying or fraud. Remember, how we referred to those mortgage products as “liar loans”?
Why on earth were these loans designed and thrust upon our industry?
To facilitate the Executive Branch of our government’s goal of increasing home ownership, that’s why. The Executive Branch, during the Clinton administration pressured HUD, FNMAE and Freddie Mac to come up with loan programs that would utilize the stated income feature of the Acorn loan, that was being originated by Commercial Bankers, to meet their CRA lending requirements. That Acorn loan program was the magic product that brought sub prime lending into the mortgage mainstream.
The attached Federal Reserve Bank of Kansas City chart is so important because it shows how things were, prior to the economic melt down. It categorically shows that the full doc, 30 year mortgage (Prime ARM & Prime FRM) were loan programs that lenders, bankers, investors, along with domestic and international investors could count on to perform.
We were enticed, by our industry leaders and regulators, and enabled by the securitization efforts of Wall Street, to substitute the loan programs that we prime lenders had originated for our entire careers, with the “fast and easy” loan programs that were now considered to be “main stream”, and thus replace the exceptionally well performing industry standard loan programs that clients demanded and we originated in order to remain competitive in our markets.
We all participated. We all were drawn into the mess in order to be competitive. And now we’re all suffering, as our industry is targeted by our government and made the scapegoat for most all that went wrong with the national financial system and our economy.
If I, with my insignificant B.S. in Business from a mid major university can see what happened, why can’t those learned leaders of ours? There is an old saying….”don’t throw the baby out with the bath water”. I find, as I grow older, that those old sayings are around for a reason….they are forever relevant.
This baby is tired of the bath, the bath water and the mis-guided and unfair efforts of my government officials, many of whom I helped elect, all of whom I support with my tax dollars, who are trying to make me and my industry the fall guy for a political agenda that was ill conceived, short sighted and mismanaged.
The toxic loan programs are gone. The investors got rid of them, not the government. The investors realized, after poor performance, that they were not good investments. We don’t need the politicians to show us the folly of deviating from the previous industry accepted risk assessment standards. We all did what we were encouraged to do, and we all have suffered, as a result.
I implore my government to get back to what we elected you to do. Stop the wars and balance the budget. And for God’s sake, stop trying to tell me how I can or can’t pay one of my employees for the services he or she renders my company. My company is not trillions of dollars in debt. I know what I’m doing.
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FHA REO Inventory Skyrockets
February 23rd, 2011
Written by Frost Mortgage
The Federal Housing Administration (FHA) released its December Monthly Report which showed that the agencies Real Estate Owned (REO) inventory was at 60,739 at the end of December, up 9.5 percent from 55,488 in November, and up 47.5 percent from December 2009.
The report estimates the current value of its REO properties to be $9.1 billion.
Combined with the two GSE’s, Freddie Mac and Fannie Mae, the U. S. Government holds roughly 360,000 REO Properties.
In its annual financial status report to Congress in November, the FHA claimed loans insured before 2009 are responsible for 70 percent of the expected single family loan losses. Though they are now prohibited, so-called “seller-financed down payment assistance loans” produced $6.6 billion in claims to-date and may ultimately cost the FHA $13.6 billion.
The FHA expects to see an increase in the number of REO properties in the future as they have reported that approximately 600,000 properties are in serious delinquency.
Here is a graph of Fannie, Freddie and FHA inventory over the last three years through Q3 2010:
February 23, 2011 (Shirley Allen)
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Buyers opting for little-used type of FHA loan
February 22nd, 2011
Written by Frost Mortgage
More people taking advantage of loan program that allows home buyers to borrow money needed for improvements
The Federal Housing Administration’s 203(k) loan program has been around for decades, but it’s been little used due in part to a lack of awareness. That’s beginning to change as a result of the realities of the housing market.
Many of the foreclosed properties that weigh on the market are in bad shape through neglect by the previous owner or months of vacancy. That makes them unattractive to prospective buyers who lack the time, expertise or money to repair them.
The 203(k) program, which is backed by the federal government, allows buyers to finance the costs of the needed repairs into the rest of the loan. The lender pays the contractor when work is completed. FHA loans, which have been used in about a third of Fredericksburg-area housing purchases of late, require down payments of 3.5 percent and mortgage insurance.
BY BILL FREEHLING
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Advantages Of An FHA Loan
February 18th, 2011
Written by Frost Mortgage
The FHA loan’s main advantage is that it helps the home owner secure a better rate from lenders. Actually, these Federal Housing Administration loans aren’t loans, because the only thing they do is insure it. But this works out very well because the mortgage then has a low down payment and closing cost, not to mention the drop in credit thresholds.
In other words, the lender is able to provide lower interest rates for those who may not even have qualified for the mortgage. Thing is that the rates vary based on a person’s credit history and score. But those able to provide Federal Housing Administration insurance are pegged on a level that’s normally only available for people with a higher credit score.
Another notable difference is that lenders demand sizable down payments in case the real estate market drops further down and property values crash again. Under such circumstances, the only way to get low down payment loans is with the help of the Federal Housing Administration. It helps that the closing costs are also part of the financing.
In fact, there’s a lot more that can be done with an FHA loan. In addition to the home purchase, the finance can also include repairs and remodeling costs. Even energy saving improvements are valid expenses.
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FHA Eases Streamline Rules
February 17th, 2011
Written by Frost Mortgage
FHA has revised the “net benefit test” for streamlined refinancing in order to make it easier for borrowers to qualify for loans with reduced principal and interest. Additionally, lenders can no longer roll closing costs, discount points or other financing expenses into the loan amount; and they cannot use an appraisal to boost the loan amount beyond the upfront mortgage insurance premium. The changes take effect in 60 days.
American Banker (02/17/11) P. 10 Collins, Brian
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FHA Announces MIP Structure Change
February 15th, 2011
Written by Frost Mortgage
The Federal Housing Administration (FHA) has announced a new premium structure for FHA-insured mortgage loans that increases its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 15- and 30-year loans. The upfront MIP will remain unchanged at 1% and will impact new loans insured by FHA on or after April 18.
According to the FHA, this premium change enables the agency to increase revenues to preserve the stability of its Mutual Mortgage Insurance fund, which had capital reserves of approximately $3.6 billion at the end of fiscal year 2010. The change is estimated to contribute nearly $3 billion annually to the fund, based on current volume FHA projections.
Furthermore, the FHA estimates that on average, new borrowers will pay approximately $30 more per month. Existing loans and Home Equity Conversion Mortgages insured by the FHA will not be impacted by the pricing change.
SOURCE: Federal Housing Administration
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FHA extends ‘anti-flipping’ waiver
February 1st, 2011
Written by Frost Mortgage
Agency study: property-flip loans do not pose excessive credit risk
Homebuyers relying on FHA-insured financing will still be able to buy homes that have changed hands in the last 90 days, thanks to a decision by the Federal Housing Administration to extend a temporary waiver of its “anti-flipping” rule through the end of the year.
The anti-flipping rule — a 90-day waiting period implemented in 2003 to protect the FHA’s mortgage insurance program from losses — already included an exemption for homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions.
By Inman News, Monday, January 31, 2011.
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