The Department of Housing and Urban Development spokesman Lemar Wooley said in a recent interview with NPR that FHA paid about $12.8 billion on almost 100,000 such claims on foreclosed homes in 2010. The average FHA mortgage was $128,000 per claim.  In 2009 FHA paid on 70,000 claims at an average cost per FHA loan was $117,000 totaling almost $8.2 billion. Will FHA mortgage loan originations rise in 2011? Most analysts believe that FHA loan originations will decline because rates are predicted to rise. However, the popularity of FHA lending should continue to increase.

It is no secret that FHA home mortgages have become very popular since the mortgage industry crashed in 2006.  Since then FHA mortgage lending has increased about 30% of the total mortgage market-share.  FHA lending continues to have a lower foreclosure rate than conventional mortgages. At the end of the 3rd quarter of 2010, the foreclosure rate for all home mortgages was 4.39% compared to 3.32% for FHA mortgage loans.  FHA rates remain extremely low and the cost for FHA refinancing continues to be less than conventional lending.

Other banks have made a similar decision, citing the greater likelihood of broker-originated loans to end up in default. Studies indicate that home loans originated by a bank employee have less of a chance of defaulting based on several other published lender reviews. According to BofA president Doug Jones, “Bank of America remains committed to purchasing and financing FHA home loans from Correspondent Lending companies, including those approved to originate loans from mortgage lenders.” FHA loan rates continue to fall to record levels, so most people in the mortgage industry still consider FHA mortgage lending a significant opportunity looking ahead to loan business in 2011 and 2012.

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

Talk to a licensed FHA professional about your qualifications and see if FHA is a good fit for refinancing your mortgage.  Read the entire FHA refinance article online. In the last 3 years, FHA refinance loans have increased their market-share for home loans nationwide.

The proposed FHA lending changes or new FHA guidelines include:

*  HUD will increase “up front” cash required on a home purchase loans, giving the buyer more “skin-in-the-game.” FHA said it can tap several options, and analysts say it will mean some increase to the current minimum down payment of 3.5%. About 31% of purchase loans done in the first eight months of 2009 had the maximum 96.5% loan-to-value. Another 55% had 95% to 96.5% LTVs for FHA mortgage options.

*  The FHA will raise the minimum credit score for new borrowers. The FHA has yet to determine the minimum “FICO” and may factor in the down payment.

*  HUD will increase compliance and hold FHA lenders accountable for losses associated with loans that do not meet FHA standards. As of Dec. 8, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.

*  HUD might increase the 1.75% up-front premium and/or annual mortgage premiums. It is asking Congress to raise annual premiums since that would raise capital with the lowest borrower impact, Donovan said.

*  HUD cut allowable seller concessions to 3 % from 6 % in a move to limit incentives to inflate appraised values. The move reduces the money the seller can contribute to a buyer’s closing costs, discount points and other concessions without impacting the buyer’s mortgage.

*  It will boost enforcement and hold FHA lenders accountable for losses associated with loans that do not meet FHA requirements. As of December 8th, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.

The FHA mortgage loan program designed to help more people finance homes, and more borrowers will qualify with FHA financing than with conventional financing. It is a low down payment (3.5% down) program and the credit standards are much looser. The mortgage rates are typically better, as well.

New Project Eligibility Guidelines

All condominiums (consisting of 2 or more units) must meet the following requirements:

• At least 50% of the units of a project must be owner-occupied or sold.

• Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.

• No more than 15% of units can be in arrears of their condominium fees.

• No more than 25% of the property’s total floor area in a project can be used for commercial purposes.

A current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. The regulations don’t define what is “adequate” but guidance may be found in the new Fannie Mae guidelines which mandate at least 10% of annual operating budget in reserves.

• No more than 10% of the units may be owned by one investor.

• Rights of first refusal are permitted unless they violate discriminatory conduct under the Fair Housing Act.

• An affirmative action-type housing plan is required for both new construction and conversions.

• Previously certified projects must re-apply every 2 years.

• The “spot approval” process is eliminated in favor of a more comprehensive review process.

The net effect of these new guidelines, combined with the recent Fannie Mae guidelines, is that it will be much tougher to obtain condominium financing as many projects will not be able to pass muster. Condominium associations, trustees, managers, lenders and buyers need to prepare and do a lot more work to approve condominium loans.