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 As of Dec. 8, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.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 As of December 8th, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.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.

o    FHA announced their new mortgage modification plans to aid distressed FHA borrowers.

o    The FHA home loan is refinanced and 30% of the FHA loan is placed into an interest-free second mortgage that must be paid back when the property is sold or refinanced.

o    Homeowners must qualify with ratios of 31/55. The 1^st ratio says that up to 31% of the individual’s monthly income can be used for housing costs and that 55% can be used for housing costs plus other monthly debts.

o    The borrowers must be able to document a hardship (ie. an income change, loss of employment etc.) and HUD must be considered as a long term hardship.   

Read the original article online > FHA Loan Modification Program.

The US residential real estate market is caught in the worst correction in decades with few reasons to be optimistic as the economy worsens, according to a key housing report released Monday.   “Despite unprecedented federal efforts to stimulate the economy and help homeowners make current mortgage payments, house prices continued to fall and home foreclosures continued to mount in most areas through the 1^st quarter of 2009,” according to the executive summary of the State of the Nation’s Housing annual report released by Harvard University’s Joint Center for Housing Studies.   “While new and existing home sales and single-family starts have shown some signs of stabilizing, ongoing job losses, house price deflation and tighter mortgage underwriting and credit are placing any recovery at risk,” the report said.

“Although there are some signs of improvement or at least steadiness in new construction and sales, housing starts stand near 60-plus year lows, and any life in home sales is coming from distressed foreclosure sales, temporary 1^st -time buyer tax credits and low mortgage interest rates for purchase and refinance that moved higher in recent weeks,” said Nicolas Retsinas, director of Harvard’s Joint Center, in a press release.  “The best that can be said of the market is that house price corrections and steep cuts in housing production are creating the conditions that will lead to an eventual recovery,” added Eric Belsky, executive director of the Joint Center.  “For now, markets remain under considerable stress,” Belsky said.

The bleak study coincided with a separate report from the World Bank warning of more damage in the global economy.   This week, investors will be focusing on housing data and any commentary the Federal Reserve offers on the economy.  “On the economic front, new and existing home sales should show improvement but from very low levels,” said David Kelly, chief market strategist at JPMorgan Funds. “The recent back-up in FHA mortgage rates, although unwelcome, really should not be enough to prevent pent-up demand and still very good affordability from triggering a housing rebound.”   Resource: John Spence, Jeff Moran