Major FHA Changes are

Coming!!!

The Good News - New HUD Policy Created to Allow Quicker Foreclosure Re-sales!

Effective February 1, 2010 the Department of Housing and Urban Development (HUD) will relax FHA rules that prohibit insuring mortgages on homes that are owned by the seller for less than 90 days - a move that could help expedite the rehabilitation and resale of foreclosure properties.

The temporary waiver, which will expand access to FHA mortgage insurance to many, will be in effect for a period of one year, unless extended or withdrawn by the FHA. With this in mind, now may be an excellent time to contact clients who have recently purchased a foreclosed property and those who may be on the fence about purchasing a foreclosure as a short-term investment.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

To ensure FHA borrowers are protected from inflated prices, the policy has certain restrictions, including:

-All transactions must be arms-length and there can be no identity of interest between the buyer and seller. ·

-If the sales price of the property is 20 percent or more above the seller's acquisition cost, the lender must meet specific conditions for the waiver to apply.

-The waiver is limited to forward mortgages, reverse mortgages are not eligible.

The Bad News - FHA Loans will Soon be More Expensive & More Difficult to Qualify For

FHA Commissioner David Stevens announced on 01/20/10 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 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.

Effective for FHA loans for which the case number is assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent. This is a big increase from the current Upfront MIP of 1.75%.  This policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions.

The FHA also plans to take the following steps: update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to 3%, from 6%; and implement a series of significant measures aimed at increasing lender enforcement.

As soon as the FHA releases the specifics on this change, we will pass that information along to you.  Should you have questions or concerns in the meantime, please don't hesitate to contact one of our very qualified Loan Officers to assist you.