Is HUD Burdening FHA Mortgage Loans too Much?

Posted on January 12, 2009 by admin 
Filed under FHA news, Mortgage News · Tagged: , , ,

A senior U.S. housing official defended the performance of the Federal Housing Administration at a congressional hearing looking into questions coming from a published FHA finance article about brokers and mortgage originators. 

The story, and others like it, “misrepresent a well-respected federal program that has provided untold benefits to millions of Americans,” said Phillip Murray, deputy assistant secretary of the Housing and Urban Development Department.  Murray criticized comparisons of FHA-insured mortgage practices to those seen in the subprime market. “FHA-insured mortgage loans are neither high-cost nor high-risk lending for homeowners,” he said.  But he added that he appreciated the chance provided by the controversy to ask Congress for more money to upgrade FHA’s computer systems. “FHA stats and loan data is actually stored on 35 separate legacy systems, which have been obsolete for nearly two decades,” he said.

FHA mortgage lending is a HUD unit that insures millions of mortgages, lowering costs for many homebuyers. Its volume of business fell sharply a few years ago as many lower income homeowners shifted to subprime mortgages. But FHA loan programs are popular again now that the subprime mortgage debacle has caused most of the home financing market to crash. Recent federal initiatives to stabilize the housing market rely heavily on the FHA, causing some lawmakers to question HUD has allowed the housing crisis to create a home loan burden on FHA. Read the complete article >

FHA Mortgage Lending Changes

In a recent article, FHA Loan Pro’s indicated there are a few key changes FHA borrowers can expect to see in this coming year. The first FHA mortgage lending guideline change is the down-payment requirement; a change that we’ve heavily covered and seen some borrowers face since late last year. For all new loan submissions after January 1st, FHA home mortgage purchases now require a down-payment of at least 3.5 %, rather than 3% like they did prior to 2009.

The other changes have been a few note-worthy updates to the FHA appraisal requirements became effective on January 1st 2009. One new product guideline change for 2009 is that more FHA loans will now require two appraisals to be eligible for FHA.  As you may already know HUD now requires FHA lenders to use state certified appraisers for their FHA mortgages. If you missed the story, you can view our previous post here. Essentially, by limiting themselves to state certified appraisers, HUD limits its exposure to possibly exaggerated or over inflated appraisals.

FHA Now Requires 2 Full URAR Appraisals

Just last month, HUD announced a change in requirements for 2nd appraisals that would take effect January 1st of 2009. In the letter supplied by HUD, a 2nd  appraisal will now be required for all cash out refinances where LTV exceeds 85 % of the appraised value. Before, a second appraisal was only required if the home was located in a declining market, the loan was above $417,000, and exceeded a 95 % loan to value ratio. If you still meet these three requirements, you’ll still need that second appraisal as well.