FHA Loan Program Longevity

Posted on October 18, 2010 by admin 
Filed under FHA Articles, FHA Credit, FHA Guidelines · Tagged:

Brokers and lenders remain nervous as FHA loan requirements may continue to increase in 2011. While fraud risk had trended down dramatically through 2008 and even into early 2009, in mid-2009 and 2010, it started to creep back up again, according to Frank McKenna, vice president of fraud strategy for analytics provider CoreLogic.  The increase is a result of high-risk government lending programs like FHA and the Home Affordable Refinance Program.  “A lot of those programs are bringing risk back into the market,” McKenna said in a phone interview following the CoreLogic Mortgage Fraud Consortium Members’ Meeting in Chicago.  “Lenders said their biggest concern this year is ‘flipping’ again. They are concerned with all of the distressed properties out there like short sales and foreclosed properties. There are a lot of investors that are taking advantage and flipping the properties the same day for sometimes 50%-100% more than the property sold for. They are seeing that as a very big problem right now.”

FHA Mortgage Rates Fell Below 4% on 30-Year Fixed Rates

Government experts from the Federal Bureau of Investigation, Financial Crimes Enforcement Network, Internal Revenue Service and Financial Fraud Enforcement Task Force were on hand to discuss policies and trends. FHA lenders like Shawn Downs, believe that “HUD is doing the best thing for long term security in regards to keeping the FHA loan programs a viable option.” Downs continued, “FHA loans in Colorado are a great option for first time homebuyers, but if too many borrowers default then the program won’t be around for the next generation.”

FHA lenders indicated that in 2010 FHA fraud is “the area that they are focusing in on,” McKenna said.  While there is strong underwriting, it doesn’t stop the fraud from happening. FHA is “still very attractive” to the fraudsters and fraud rings because they like to recruit straw borrowers.  “FHA guidelines, in terms of who qualifies and how much they have to put down, are a lot more lenient than the typical type of conforming programs. They can recruit young college graduates who don’t have a lot of credit history or people who don’t have great credit history and they only have to put 3% down.”

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