When the Government poops on us, turn it into fertilizer, right?
FHA announced yesterday, January 20, 2010 some additional policies:
WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.
I applaud them for doing what they have to do to survive. 50% of all transactions in Riverside County in 2009 were FHA loans. I expect that number to be duplicated if not surpassed in 2010. So, do what you got to do Mr. Stevens to make it work.
Here are the highlights to the policy changes:
- Increase the Mortgage Insurance Premium from 1.75% to 2.25%
- Update the combination of credit scores and down payments for new borrowers
- Reduce seller credits to 3% from 6%
- Implement a series of measures to increase lender enforcement
I have placed a rating score for the severity of these new policies by the use of a common street light. Red=Not so great for the consumer; Yellow=neutral; Green=good for all humanity.
Increasing the MIP to 2.25% will not hurt the bottom line to a borrower, this will not increase out of pocket expense at closing, however FHA will most likely adjust monthly premiums come late Spring/Summer – I will keep you updated.
Scores below 580 will be required to put 10% down – only 2 lenders that I know of are currently accepting scores under 580. I call them Cheese Grater loans. You’ll feel like you’ve been through a cheese grater by the time you get to docs. No big surprise here. More money for less than stellar credit borrowers, okay, it levels the playing field I guess.
Reducing seller concessions from 6% to 3% – okay, the last time I saw 6% credit given to a buyer was due to the buyer overbidding for the home to use the additional credit to pay for closing costs, thus inflating the value of the home artificially. Normally, a 3% credit is the maximum in Riverside County. This reduction is in line with other loan programs outside of FHA, so again, no surprise.- The only people cringing at stricter enforcement are those that produce bad loans.
Aside from the possibility of monthly mortgage premiums going up later this year, it’s going to be fine. So take a deep breath and know that FHA’s got your back. We want FHA to stick around. Don’t you?
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