Verlin Vink and The Vink Team

The FHA has gone crazy, making sweeping new
changes in several policies. You’ve got to
keep these in mind when clients consider
FHA loans.

Here are some of the most extreme changes:

**** Raised up-front costs for insurance

**** TRIPLE downpayment requirements

**** Cut seller concessions by HALF!

The government hopes the new policies will
help the organization better handle risk. And
they’ve got every reason to be nervous.
9% of all loans that the FHA insures are
past due. FHA claims have been skyrocketing
with the organization paying out of its
capital reserves.

30% of all new loans (and 20% of refinances)
are backed by the FHA. This is a 1,000 percent
increase over 2006. This seems like shaky
ground for the company. The FHA is hoping
to scale back to pre-crisis times and minimize
their exposure.

The new up-front mortgage premiums have risen
to 2.25% starting in the spring. They are
also aiming to raise the maximum annual premiums
that they can charge. They are hoping these
moves will help them replenish their reserves.
FICO scores will now need to be at least 580
to qualify for the lower downpayment program
(3.5%) instead of 10%. This change begins in
summer.

Also, sellers will find themselves with new
restrictions as well. Closing costs that
they can kick in are limited to 3% of the
value of the property, down from 6%. They
are hoping this will drive down inflated
valuations.

And of course, all these changes come with
more oversight. Lenders will be ranked based
on performance and these figures will be
made publicly available.

The bottom line of these changes is the effort
to minimize risk of default and help the
housing industry recover (as well as cover
the FHA’s a**).

How do you think these new rules will affect
us?

Cory Boatright
Loss Mitigation Specialist

January 15th, FHA temporarily changed its policy and lifted the 90 day seasoning requirement for a period of one year starting February 1, 2010. This is exceptional news for our industry. There are still some restrictions and requirements, but the policy change recognizes the needs of the marketplace. In their press release the FHA stated,

“In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”

The FHA still has concerns over predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions. (These conditions can be met rather easily with supporting documentation. – AZREIA)
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
The complete text of the Waiver is at http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf. It is suggested that you read it in its entirty to understand how it affects your business directly. Also, the complete press release is at http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011 .

Home Buyer Tax Credit: No e-file and four month delays

By CNNMoney.com Les Christie staff writer

January 16, 2010: 6:54 AM ET

On Thursday, CNNMoney revealed that buyers who purchased their properties after Nov. 6 were unable to claim the refund because the Internal Revenue Service had yet to release a new form and instructions. But on Friday, the IRS finally posted the new form 5405.

The two-month delay was frustrating to Florida resident Charles Teschke. “We are not broke or anything, but nevertheless we were still counting on getting the tax refund to help pay for the appliances and stuff we needed for our new home,” he said. “The IRS told me they estimate it will take four months for me to get my refund!”

First-time buyers were able to immediately file for the tax credit after Congress approved it last February as part of the stimulus program. All they had to do was file an amendment to their 2008 tax returns (the ones they filed last April) and claim the promised refund of 10% of the purchase price, up to $8,000.