Archive for the ‘FHA’ Category

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Americans equate homeownership with liberties

Monday, March 8th, 2010

A great article published in the New York Times taps into the American psyche when it comes to homeownership. The author, Robert J. Shiller (one half of the super Swedish rock group Case/Shiller), provides a brief history behind  the creation of The Federal Housing Administration (FHA) and Fannie Mae in the 1930’s. Mr. Shiller notes these institutions were created to prop up the housing market and thus stimulate employment. (One-third of the unemployed during The Great Depression were identified with the building trade.)

Mr. Shiller questions the financial soundness of having the taxpayer continue to finance (or at least insure) the American Dream. He feels the driving force behind this call to action is Americans’ belief that homeownership means the preservation of certain liberties. While few can argue with this observation, the article leaves out another important side of the story.

Prior to the advent of FHA, Americans were losing a home to foreclosure at a rate of 1,000 a day. At the time, it was not uncommon for homeowners to have multiple mortgages (each with short terms and high rates). Sound familiar? FHA mortgages were created to cure this ailment by allowing at-risk homeowners to refinance these high cost loans with low, fixed rate mortgages. The program was later expanded to help homebuyers finance their purchases. What FHA brought to the table for the first time was an amortized mortgage. Overtime, this instrument helped Americans build equity in their homes as well as build their personal wealth.

While Mr. Shiller is right to question the risk of supporting these institutions, it’s also important to look at the wealth building opportunities these lending programs have provided to disadvantaged populations. Rather than reinventing the wheel to get us out of The Great Housing Depression, we’d be wise to revisit history and learn what we can from the FHA.

DHW asks: What do you think?

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Posted in FHA, Housing, case-shiller, fannie mae, homeowners, robert shiller, shiller | 1 Comment »

Lenders with high FHA default rates subpoenaed

Wednesday, January 13th, 2010

As demand for FHA-insured loans skyrockets, and more risk is incurred by the American tax payer, HUD is investigating mortgage companies with higher than average defaults.

The following companies were served with HUD’s Office of Inspector General (OIG) subpoenas.

• First Tennessee Bank N.A., Memphis, TN
• Alethes LLC, Lakeway, TX
• Security Atlantic Mortgage Co., Edison, NJ
• Pine State Mortgage Corporation, Atlanta, GA
• Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
• Alacrity Financial Services, LLC, Southlake, TX
• Assurity Financial Services, LLC, Englewood, CO
• D and R Mortgage Corporation, Farmington, MI
• Webster Bank, Cheshire, CT
• Mac-Clair Mortgage Corporation, Flint, MI
• Americare Investment Group, Inc., Arlington, TX
• 1st Advantage Mortgage, Lombard, IL
• American Sterling Bank, Independence, MO
• Sterling National Mortgage Company Inc., Great Neck, NY
• Dell Franklin Financial LLC, Columbia, MD

DHW asks: Have you worked with any of these lenders?

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Posted in FHA, HUD, lenders, loan default rate, loan defaults, office of inspector general, oig | 1 Comment »

Chinese drywall suit sees day in Federal court

Wednesday, January 6th, 2010

If you have Chinese drywall and an FHA-insured mortgage, contact HUD at 888-297-8685 regarding special mortgage terms.

From The Miami Herald, Shannon Behnken:

“HOMESTEAD, Fla. – Jan. 5, 2010 – After months of legal wrangling, it appears one of the first lawsuits filed over faulty Chinese drywall is headed to trial in federal court.

Melissa and Jason Harrell of Homestead filed a lawsuit against South Kendall Construction, Palm Holdings, Keys Gate Realty and Banner Supply in March.

The couple moved out of their home, built in 2006, after the entire family experienced breathing problems and headaches, and the coils of their air conditioner corroded and their home smelled of chemicals. They attributed all of the problems to the imported drywall used to build their house.

On Wednesday, the Third District Court of Appeal ruled that Banner Supply had ample opportunity to inspect the Harrells’ home and make an offer to repair it. Attorneys for the supply company did not return phone messages. Banner Supply had argued it had not been given enough time to make a repair offer and avoid litigation. “The courts are not going to be taken in with technical defenses that delay getting to the real heart of the matter,” said Stephen Rosenthal, one of the Harrells’ attorneys.

Earlier, a judge had ruled the Harrells could sue for damages beyond the cost of repairs – they could also sue for the loss of value to their home, the cost of alternate housing and more extensive remediation to their house, from new pipes to new appliances.

“For the Harrells pretty much right now, all the legal barriers have been cleared,” their attorney Alex Rundlet said.

The Harrells’ suit could pave the way for others in the same situation, including thousands of homeowners from around the country whose cases are being handled by a federal court in Louisiana.

Drywall victims learned of other victories this week, too. After merely encouraging lenders to give families with Chinese drywall a break on their mortgages in the past, the U.S. Department of Housing and Urban Development instructed FHA-approved lenders that they must do so this week.

“This is more than encouragement,” HUD spokesman Lemar Wooley said. “It notes instructions and specific guidance for FHA lenders.”

Some families juggling mortgage payments and rent or who are paying for expensive repairs have already slipped into foreclosure or are on the verge.

Federal Housing Administration lenders have been told they are to temporarily suspend mortgage payments for homeowners with the tainted wallboard. Or they should allow borrowers already behind to pay only their monthly mortgage bill for several months, without making back payments. And homeowners should not be charged late fees if they are given these accommodations.

In addition, the agency’s Community Development Block Grant program may offer homeowners money to pay for repair costs.

For most other CDBG programs, people who receive grants cannot earn more than 80 percent of an area’s median income. But a community could decide that doesn’t apply to this situation, said Gloria Shanahan, a spokeswoman for HUD in Miami.

Homeowners would need to contact their city and county governments to see if they have money from the program and if the local government will consider grants for drywall repairs.

For more information about the special mortgage terms for homeowners with Chinese drywall, call the HUD National Servicing Center, 888-297-8685.”

DHW asks: Do you have Chinese drywall? If so, what are you experiencing?

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Posted in FHA, HUD, Housing, chinese drywall, florida, homestead, mortgage, suit | 1 Comment »

HUD to assist homeowners with Chinese drywall

Tuesday, December 29th, 2009

Press Release – “HUD to assist homeowners facing problem drywall. Temporary relief available to make home repairs affordable for at-risk borrowers.”

DHW asks: Do you or someone you know have Chinese drywall?

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Posted in FHA, HUD, chinese drywall | 1 Comment »

Help available for Grandparents raising children

Friday, December 4th, 2009

From The New York Times, December 4, 2009

“Last year, about 2.6 million grandparents were raising grandchildren under 18 years old, up 4 percent from 2007, Census data shows.”

Amy Goyer of the AARP predicts a rising number of “grandfamilies” as substance abuse, teen pregnancies and mental illness persist. ”It’s definitely not an issue that’s going to go away,” said Goyer.

However, as the article suggests, there are housing options available for grandparents who find themselves returning to the world of parenting.

DHW asks you grandparents: Could you raise children again?

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Posted in FHA, Housing, grandparents | No Comments »

FHA to get tough with new borrowers. Really?

Wednesday, December 2nd, 2009

The Washington Post reported Wednesday the Federal Housing Administration will propose tougher guidelines for new borrowers. In an effort to curtail risk to the agency, higher down payments, restrictions on seller contributions and higher insurance premiums are being considered.

The minimum down payment required by FHA is currently 3.5 percent. One lawmaker suggests an increase to 5 percent.

The article notes that “critics” of the program wish for an agency overhaul. DHW thinks “critics” is code for Fannie Mae and Freddie Mac lobbyists.

The agency is also considering increasing the minimum credit score for new borrowers, currently 500. Many lenders require a higher credit score to underwrite FHA insured loans (generally a 585-600 minimum).

DesperateHouseWise has the following suggestions for FHA:

  1. Maintain the current 3.5 percent down payment
  2. Increase the upfront mortgage insurance premium to 2.25 percent
  3. Maintain the current monthly mortgage insurance premium
  4. Increase the minimum credit score to 575 (exceptions for 500-574: a) no late payments in past 12 months for any debt b) debt-to-income strictly kept at 41% or less. Younger borrowers with little or no credit and borrowers electing not to use credit on a regular basis should not be discouraged from using the FHA to build wealth)
  5. Limit seller contributions toward typical buyer closing expenses to 3.5 percent (currently 6 percent). This will hopefully encourage buyers to negotiate competitive interest rates without having to pay excessive discount points, origination fees and broker fees (a common practice for predatory lenders)

DHW asks: Do you think tighter restrictions on FHA guidelines will help or hurt the agency?

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Posted in FHA, credit, down payment, fha guidelines | No Comments »

FHA goes upscale, sort of

Monday, November 30th, 2009

The Washington Post published a bristling rebuke of the FHA’s attempt to strengthen the upper-end real estate market through its loan guaranty program. Although the author is well intentioned, the article reflects a clear misunderstanding of how the FHA program works. “Legislation last year nearly doubled the maximum mortgage the FHA could insure, to $729,750 for single-unit properties and almost $1 million for multi-unit ones”, the article reads. The writer fails to mention that these loan limits are rightly reserved for designated high-cost areas, such as Los Angeles. A homebuyer in Tallahassee, FL, for example, is limited to a loan amount of $271,050 for a single-family property insured by the FHA (so long as he or she qualifies). The article goes on to suggest that the function of the FHA is to no longer encourage “upward mobility” but rather facilitate the “upward transfer of wealth.” Again, the writer leaves out one important bit of information: Of all the loans insured by the FHA in 2009, 80 percent represent first-time homebuyers.

DHW asks: Do you know the FHA loan limit in your area?

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Posted in FHA, Washington Post, fha loan limits, upmarket | 1 Comment »

Be a patriot: purchase a home with FHA

Wednesday, November 25th, 2009

Besides saving yourself money, using an FHA endorsed loan to purchase a home may be the most patriotic thing you can do.  Hear me out. In the late 1990s, the government correctly sought to increase homeownership. Naively, the government did not look to the FHA to take charge in this call to action. Instead, they relied on Fannie Mae and Freddie Mac to broaden the types of loans they purchased from mortgage lenders, relaxing underwriting guidelines and pushing the moral envelope. Fannie Mae and Freddie Mac had a fiduciary responsibility to look after the well being of their shareholders, not the consumer. As such, the loans created over the next few years put an emphasis on profit — excessive prepayment penalties, interest only and “teaser” rates. The appeal to consumers: These new loans came with little or no money down.

In FY 2009, FHA insured 30% of total purchases and 20% of total refinances in the housing market (it does not lend its own money). Here are just some of the benefits of using the FHA.

  • Low down payment of 3.5 percent. The down payment can even be a gift from a relative, non-profit organization or employer.
  • Interest rates are competitive with  conventional mortgages
  • Guidelines allow buyers to qualify for more home than conventional loans
  • There is no income cap for FHA
  • Fixed interest rate with no prepayment penalty

Uncle Sam NEEDS YOU!

When you use the FHA to purchase a home, you pay an upfront mortgage insurance premium (MIP). This upfront premium is commonly rolled back into the mortgage to avoid an out-of-pocket expense. In addition, you pay a monthly MIP. The monthly MIP is less expensive than private mortgage insurance (PMI) for a conventional loan with 5 percent down (if you can still find a lender originating 95% LTV conventional loans). These MIP fees generate $1 billions in revenue for the government every year.

The FHA loan can also be used to finance home improvements for purchases and refinances under its 203K program.

Find FHA approved lenders in your area

Find FHA loan limits in your area

DHW asks: Have you used the FHA to purchase or refinance a home? How was your experience?

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Posted in 203k, 203k lenders, FHA, fha lenders, fha loan limits | 1 Comment »

25 percent of Florida mortgages behind in payments or in foreclosure

Monday, November 23rd, 2009

The Mortgage Bankers Association released a sobering report showing the housing recovery has a long road ahead. Here are some highlights (or low-lights) of their report.

  • 1-in-4 of every Florida mortgage is behind in payments or in foreclosure
  • Nationally, 14 percent of mortgages are behind in payments or in foreclosure
  • Lost jobs are the main cause of homeowners falling behind on mortgage payments (unemployment is not expected to peak until next spring or summer)
  • Prime fixed-rate loans to borrowers with good credit made up 33 percent of foreclosures last quarter (up from 21 percent last year)
  • Subprime loans with adjustable rates made up 16 percent of foreclosures last quarter (down from 35 percent last year)
  • 18 percent of FHA borrowers are behind in payments at least one month or in foreclosure.

DHW asks: When do you see the housing market hitting bottom?

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Posted in FHA, foreclosure, homeowners, mortgage bankers association, prime loams, subprime loans | 1 Comment »

Stevens: FHA sublime, not subprime

Monday, November 16th, 2009

During a speech to the National Association of Realtors in San Diego, FHA Commissioner David Stevens said his agency is not headed for the same fate as Fannie Mae, Freddie Mac or the subprime sector. Concerns about the FHA’s financial well being were raised last week when it was revealed in an independent audit that the agency’s funds were below legal guidelines.

The Commissioner sought to minimize these concerns, reporting the agency had $31 billion in capital – an increase of $3.5 billion from a year ago.

Stevens went on to say that the FHA is  “the only participant in home financing services in the U.S. economy that hasn’t needed a bailout, hasn’t needed (funds from the government’s Troubled Asset Relief Program), hasn’t needed special assistance and is still completely self-sustaining.”

The AP reports the FHA has insured almost 25 percent of all new loans made in 2009. Eighty-percent of these loans represent first time home buyers.

Stevens rejected comparisons between the FHA and the subprime market.  “Nothing could be further from the truth,” he said, stressing the FHA has far more stringent underwriting guidelines for the loans it insures.

As the unemployment rate has risen, so have FHA’s losses. According to the Mortgage Bankers Association, approximately 17 percent of FHA borrowers are at least one payment behind or in foreclosure. This compares with 13 percent for all loans.

The FHA does not make loans. It insures against default, taking much of the risk away from lenders. FHA loans have grown in popularity in recent years as credit markets have tightened up. The agency’s 203K rehab loan is also growing in popularity as more first-time home buyers purchase foreclosures.

DHW asks: Do you think the FHA is at risk of needing a government bailout?

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Posted in 203k, 203k lenders, 203k mortgage, 203k rehab loan, 203k streamlined, FHA, Housing Article, david stevens, fha 203 k, fha 203k, fha 203k lenders, fha 203k loan, fha 203k mortgage, fha 203k mortgage loans, first time home buyer, first time home buyers, first time homebuyers, foreclosure, freddie mac, homebuyers, realtor, realtors, rehab loan, subprime | 1 Comment »

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