FHA MIP Factors (as of Apr 2012)

May 21, 2012 by · Leave a Comment 

FHA mortgage insurance is better known as “MIP”, which stands for “Mortgage Insurance Premium.”  MIP is collected two ways, up-front and per month.  Effective April 1, 2012, FHA has increased the up-front MIP by .75% and the monthly MIP by .1%.  The monthly MIP is calculated by multiplying the factor times the loan amount and then dividing by 12.  As of April 1, 2012, the new FHA MIP factors are as follows:

Up-Front MIP for all loans =                                                1.75%

30 Year Monthly Factor with min 3.5% down =          1.25%

30 Year Monthly Factor with 5% or more down =     1.20%

15 Year Monthly Factor with min 3.5% down =           .60%

15 Year Monthly Factor with 5% or more down =      .35%

15 Year Monthly Factor with 22% or more down =     0%

FHA Underwriting Changes

April 5, 2012 by · Leave a Comment 

FHA made a number of key underwriting changes this week, some good, some bad.  Below is a brief summary of the most important changes made:

  • For self-employed borrowers, a year-to-date Profit & Loss Statement (P&L) and Balance Sheet are required if three months have elapsed since date of most recent filed and submitted tax returns.  In addition, if income from the P&L is being used to increase the amount of qualifying income for the borrower, then the P&L must be audited by a CPA.  These are much stricter requirements for self-employed borrowers.
  • “Disputed” items showing on a borrower’s credit report will not be as much of an issue as in the past and don’t have to be addressed if they are less than $1000 and more than two years old.
  • Collections showing on a borrower’s credit report also won’t be too much of an issue up to a certain degree.  If the total outstanding balance of all collection accounts is < $1,000, the borrower is not required to pay these off.  However, if the total outstanding balance of all collection accounts is > $1,000, the borrower must either pay off the collection accounts in full or show a payment arrangement with at least three months of timely payments having been made (this payment would have to be counted in debt ratio as well).  Paying down collection balances to reduce the balance under $1,000 is not allowed.   
  • Judgments showing on a borrower’s credit report have to be paid in full unless a payment arrangement is in place with at least three months of timely payments can be documented.  Also, tax liens always have to be paid in full.

President Obama Announces FHA Refinance Incentive

March 13, 2012 by · Leave a Comment 

President Obama announced a new major FHA change last week that generated a lot of press and has a lot of substance. Home owners who purchased prior to May 31, 2009 using FHA financing will be allowed to refinance at an up-front mortgage insurance (MIP) factor of only .01% and an annual MIP factor of only .55%.  The MIP factors are increasing to 1.75% and 1.25% on April 9th, so this equates to HUGE savings for any eligible home owner.  This is a big deal equating to a savings of $100 a month on a $150k loan!

FHA Proposes Lower Allowable Seller Paid Concessions

March 6, 2012 by · Leave a Comment 

On February 23rd, FHA proposed that the maximum amount that a seller or other interested third party can pay toward a buyer’s costs at closing (to include closing costs, prepaid items, discount points, up-front MIP, and any interest rate buydown) be reduced from 6% to 3% or $6000, whichever is greater.  At first glance, this appears to be bad news because of how important it is to minimize an FHA buyer’s cash out of pocket.  On lower-priced homes, a buyer’s costs will always exceed 3%, thus, lowering the limit will only have the net effect of reducing the number of eligible FHA buyers that are out there.  Although this is true, once you take a closer look at the proposal, there is actually some very good news that should be celebrated, and here’s why.

FHA first submitted a proposal on this topic on July 15, 2010 which called for a reduction of the maximum seller paid concession from 6% to 3%.  The good news is that the new proposal allows for an overriding $6000 cap on top of the 3%.  The $6000 limit equals a 3% cap on a $200,000 home, but increases to a 4% cap on a $150,000 home, a 6% cap on a $100,000 home, and an 8% on a $75,000 home!  Thus, FHA has actually increased the cap for prices under $100,000!   

Kudos to FHA for adequately addressing the major concern of its initial proposal and landing on a compromise which will enable a seller to still contribute the majority, if not all, of a buyer’s costs on lower-priced FHA loans.  It is worth noting that the seller can only contribute toward actual costs and not over and above.

FHA is currently taking comments on this proposal through Mar 26th.  Click here to submit your comments on the reduction of seller concessions

FHA MIP Going Up Again

March 6, 2012 by · 1 Comment 

FHA mortgage insurance is called MIP (Mortgage Insurance Premium) and is collected two ways, up-front and per month.  Over the last few years, FHA has already increased the MIP several times.  Unfortunately, they are back at it again.  Effective with all case numbers assigned on or after April 1st, the up-front MIP is increasing from 1% to 1.75% and the monthly MIP is increasing from 1.15% to 1.25% (this is an annual % which you multiply times the loan amount and divide by 12 to get the monthly MIP amount).

FHA has given two main reasons for these increases.  The first is to reubuild the agency’s capital reserves, and the forecast is that these increases will add another $1.25B. in revenue per year.  The second is to encourage the return of private capital back into the residential mortgage market.  Put another way, FHA is trying to discourage the use of the FHA program and hoping more sources of alternative financing will arise.

To put these increases in perspective, on a $150,000 purchase, the .75% up-front increase will add about $1000 to borrower’s loan amount and increase the payment about $5 a month.  The .1% monthly increase will also add another $12 a month to the payment.  Thus, the combined effect of these changes is a $17 per month increase to the payment.  This equates to an increase of $11 per month on a $100,000 purchase and $23 per month on a $200,000 purchase.

These MIP increases are not wonderful news for FHA buyers but they have created an incentive for these buyers to get a house under contract and make sure their lender gets the FHA case # ordered by Mar 30th.

Read the entire FHA press release at: http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-037

FHA Contemplating Reduced Seller Paid Concessions

January 24, 2012 by · Leave a Comment 

On Friday, FHA released a letter proposing that the maximum allowable seller concessions be reduced from the current 6% limit to something less.  FHA is contemplating this change to “better manage risk” as they feel the current level exposes the FHA and borrowers to excess risk by creating an incentive that inflates the appraised value.  FHA first mentioned this as a possibility all the way back on July 15, 2010.  After bringing up the possibility of such a reduction a full year and a half ago, nothing has been heard from FHA again on the subject, until now.  Reducing how much of the buyer’s costs that the seller can pay at closing would be a major blow to the real estate industry.  Reducing this limit from 6% to say 3% would require most FHA buyers to bring more money to the table, to the tune of several thousand more $’s.  This is money they simply don’t have in many cases.  The official proposal will be finalized soon and then there will be a 30 day comment period in which we’ll be able to make lots of noise.  Hopefully, our industry lobbyists will show up in a big way and keep this limit from decreasing!  I will send you more info on how you can make your feelings known about this once the proposal is officially issued. 

In the same announcement, FHA also mentioned they may soon require indemnification for “serious and material” violations of FHA originated loans.  This means that any inaccuracy in a loan file could be interpretted as fraud or misrepresentation and cause the lender to have to repurchase the loan.  A few of these repurchases could put a small lender out of business.  Stated another way, FHA is proposing to make it harder for lenders to make FHA loans.  Just what we don’t need right now!

FHA Extends Anti-Flipping Waiver Through End of 2012

January 17, 2012 by · Leave a Comment 

To cut down on fraud, FHA has had an anti-flipping regulation in place for years preventing a seller from selling a home owned less than 90 days.  In an effort to accelerate the resale of foreclosed properties, FHA waived this rule in Feb of 2010 and then extended the waiver through the end of 2011.  FHA recently announced that they are extending the waiver through the end of 2012.  This announcement has been well publicized but its important to understand that this is simply an extension of FHA’s policy for most of the last two years.  So, although this is good news, it is not necessarily new news.  It is also important to understand that most every FHA investor has “overlays” on top of the stated FHA guidelines that make the FHA guidelines more restrictive.  The most liberal overlays allow for the anti-flipping waiver BUT with the strict limitation that the resale price not be more than 20% greater than the acquisition price, even if there were renovations.  An exception would need to be granted for a resale value of more than 20%.  The bottom line is always be careful when your FHA buyers are buying homes that the seller has recently acquired.  Check to see when the seller acquired the property and make the Loan Officer aware of the acquisition date if it was within the last six months.

FHA Loan Limits

November 22, 2011 by · Leave a Comment 

Congress reinstated higher loan limits for FHA loans last week, however, this news is not the good news it seems to be for the Atlanta market. Several months ago, FHA loan limits were reduced by about $25,000 in metro-Atlanta. Congress has not returned these loan limits to the previous level, rather they approved legislation that allows for higher loan limits in certain “high-cost” areas of the country. In cities like San Francisco and New York, the loan limits are allowed to go as high as $729,750 for another two years. This is great news for these high-cost areas but is of no benefit to the metro-Atlanta area where the single-family FHA loan limit remains $320,850.

 

 

FHA Loan Limits Set to Drop on October 1st

September 19, 2011 by · Leave a Comment 

 

The FHA loan limits that have been in place for the last 3.5 years are going to fall on October 1 unless Congress intervenes and does something about it. A bill introduced by Johnny Isakson (GA) and Robert Menendez (NJ) would extend the current FHA levels for another year. If the bill is not passed by the end of next week, the FHA loan limits in metro-Atlanta will drop from $346,250 to $320,850 for a 1-unit property. Hopefully, Congress steps in and keeps the FHA loan limits from rising. If not, lower limits will limit the FHA program and eliminate many buyers from the market. If the loan limits are lowered, this would take effect for FHA Case #’s ordered on or after October 1. Thus, any buyers who come under contract over next two weeks who are looking for FHA loans in the $320,850 to $346,250 loan size range will need to make sure that their Loan Officer gets their FHA Case # ordered by next Friday. It does not matter that the closing is after Oct 1; the lender simply needs to order an FHA Case # for that property before the deadline.

 

Senator Isakson Proposes Bill to Keep FHA Loan Limits from Declining

August 30, 2011 by · Leave a Comment 

 

In one of my July newsletters, I included a warning that FHA may reduce the FHA maximum loan limits this fall as a “sunset provision” is set to expire on Sept 30th. Traditionally, FHA has set the maximum loan limit in each county in the US based on the median house price in that county. For the last three years, in an effort to mitigate the effects of the economic downturn and the sharp reduction of mortgage credit availability from private sources, Congress has temporarily increased FHA max loan limits to propped up amounts. The general sentiment this time around is that Congress is not going to step in and approve propped up amounts again this year. However, worth reporting, Georgia’s own Johnny Isakson, along with Robert Menendez of NJ, has introduced a bill which would extend the current FHA levels for another year. If passed, this should prevent FHA loan limits from declining in 669 of the 3,334 US counties or county equivalents eligible for FHA mortgage insurance. If the loan limits are lowered, this would take effect for FHA Case #’s ordered on or after October 1, 2011. In the metro-Atlanta area, the limit would decline by $25,400 from $346,250 to $320,850. Hopefully, Congress steps in and keeps all the max FHA loan limits at today’s levels. NAR certainly supports this position as do many Congressman. However, a large number also feel that the present housing crisis was brought on by irresponsible practices and that FHA must not continue to falsely prop up limits. A month away from the deadline, it appears this fight could go either way. Needless to say, I will keep you posted. For more details on this subject, click on the following link:

 

http://portal.hud.gov/hudportal/documents/huddoc?id=FHA_Loan_Limits_HERA.pdf

 

 

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