Today, an FHA mortgage remains the only low down-payment lending product, requiring just 3.5% from borrowers. Just five years ago, FHA loans had a market share of only 5%.  In 2010, FHA lending accounts for about 30% of all home loan originations nationally. This surge of mortgage loan volumes has increased the pressure on the FHA Mortgage Insurance Fund. FHA is required to maintain this emergency fund of reserves above 2% based on all of its insured mortgages.  This year we saw the reserves fall well below the 2% minimum and HUD has been forced to take drastic steps, like tighten the FHA guidelines.

FHA Mortgage Lending Back in Style

In an effort to preserve the sacred FHA loan program, HUD announced it will be raising its annual mortgage insurance premium from 0.55 % of the mortgage amount to 0.90% (for loan to values higher than 95%) or 0.85% (for LTVs lower than 95 %). This insurance premium hike will go into effect, October 4th, 2010.  In an effort to save face, FHA will be lowering their upfront mortgage insurance to compensate homeowners for their rising monthly payments. This is good news for new homebuyers because the fees are dropped to 1% of the loan amount from 2.25%.  Overall, it looks to add $300 million a month to the insurance fund by taking these actions.

FHA Borrowers to Pay More Monthly

So what does that mean to FHA buyers come October? It means they will be paying more each month.  For example, let’s take a $250,000 purchase. Under the current FHA mortgage insurance framework, the upfront premium would be $5,428 for a total loan amount of $246,678. The monthly mortgage insurance would be $110.57. Take an interest rate of 4.625%, and the principal and interest payment would be $1,268.27. Add the $110.57 and you get $1,378.84.

Under the new FHA requirements, the new upfront amount would be about $2,500 on a FHA mortgage loan amount of $250,000. However, the monthly insurance jumps to $180.94. Take the same interest rate, and the principal and interest payment decreases to $1,252.76. But with the higher premium, that total payment comes in at $1,433.70, an increase of almost $55 a month.  To a borrower who is just barely qualifying, that can have an effect. It also puts into play taking another look at private mortgage insurance as an alternative for the borrower.  These types of adjustments shouldn’t be surprising as FHA tries to adjust to the marketplace. It recently released its quarterly report to Congress, and it shows just how much FHA has become a part of the mainstream when it comes to mortgage lending.

According to DSNews.com, So far this year the MRB has taken action against nearly1,500 approved FHA mortgage loan companies who failed to meet FHA loan requirements.  A notice was published in the Federal Register with cited actions that included reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.  The board said it voted to immediately withdraw its approval because the 905 lenders were not in compliance with the department’s annual recertification requirements.

An additional 147 FHA lenders were said to have failed to timely meet requirements for annual recertification of HUD/FHA approval, but are now in compliance.  The board voted to give these FHA lenders an opportunity to settle the matter by paying a $3,500 civil money penalty without admitting fault or liability.

The HUD Reform Act of 1989 established the MRB. The board’s primary purpose is to monitor approved FHA mortgage lenders for violations of the agency’s program requirements.  The question is — Will the lenders survive for a year without the ability to originate FHA home mortgage loans?

Chip Cumming Talks FHA & 1^st Time Home Buying

www.youtube.com/watch?v=oGZBcJ_sQLo

FHA mortgage rates are fixed and there is never a pre-payment penalty with a FHA home loan.  Buying a home can be a costly experience, so first time homebuyers have the ability to preserve capital with FHA loans because borrowers can finance up to 96.5% loan to value. That means that a new home buyer can get into a home with only a $3,500 down-payment. 

There is a lot to consider with FHA mortgage financing, but an experienced FHA lender or licensed loan officer should be able to shed some light on the pros and cons of a FHA mortgage. The $8000 first time homebuyer tax credit expired April 30th, but the record low rates should be enough of an incentive to become a homeowner. Read the original FHA mortgage advice article online  > FHA Home Loan Options for 1st Time Homebuyers.

The NY attorney general’s office said “Mortgage relief companies target homeowners facing foreclosure by promising to restructure their home loans with an affordable loan modification. Cuomo accused these mortgage relief companies of operating in deceptive practices that lure distressed homeowners to pay them for mortgage relief services, yet they often fall short to modify the mortgage.

The FHA Mortgage Solution

First of all FHA has been helping struggling homeowners since 1934. With their flexible FHA guidelines, HUD has been a leader in the foreclosure prevention arena. FHA has solidified a good reputation for rectifying FHA loans in default.  In 2009 the FHA annual report says that “82.7% of the FHA mortgage loans that were 90 days or more delinquent were brought under control.”

To get FHA mortgage relief, you need to contact a HUD foreclosure avoidance counselor at http://www.hud.gov/offices/hsg/sfh/hcc/fc/. There is no fee for their mortgage relief services so you have nothing to lose.  FHA refinance guidelines remain more flexible than conventional loan programs.   For borrowers who don’t have much home equity, they may still qualify for a rate and term FHA refinance at 96.5%.

The government agency tightened FHA loan requirements with amendments on the FHA guidelines making qualifying more challenging for new home buyers.  Read the original FHA loan article online at > Home Buying Opportunities with Declining FHA Loan Rates