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January 11, 2012

Federal Reserve and FHA Looking for Safer Loans in 2012?

Category: Federal Reserve,FHA – admin – 12:51 am

The Federal Reserve has received a lot of heat in the last few years for committing to back so many bad mortgages.  The Federal Housing Administration has increased monthly mortgage insurance premiums several times in the last few years. The increased premium helps to bolster FHA reserves, but it definitely decreases affordability for borrowers because FHA mortgage loan payments increase when mortgage insurance premium rises.  FHA refinance rates have made head-line news all year. Rates continue to be available at 60-year lows, below 4% on thirty year terms.

Today, the Fed announced that it contributed $76.9 billion in profits to the Treasury Department last year, slightly less than its record 2010 transfer but much more than in any other previous year.  The Fed is required by law to turn over its profits to the Treasury each year, a highly lucrative byproduct of the central bank’s continuing campaign to stimulate economic growth.

Nearly 97% of the Fed’s income was generated by interest payments on its investment portfolio, including $2.5 trillion in Treasury securities and mortgage-backed securities, which it has amassed in an effort to decrease borrowing costs for businesses and consumers by reducing long-term interest rates.  Through those purchases, the central bank has become the largest single investor in federal debt and securities issued by the government-owned mortgage finance companies Fannie Mae and Freddie Mac. As a consequence, most of the money flowing into the Fed’s coffers comes from taxpayers. See more first time home buyer programs from FHA.

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November 15, 2011

Could Larger Home Loan Limits Help Us Escape the Housing Crisis?

Category: FHA,Home Loan News – admin – 5:18 pm

Under heavy pressure to crush the housing crisis, many lawmakers are considering the loan limits for FHA financing. Many FHA lenders in California, Colorado, Virginia, New York and Washington have expressed their concerns regarding the pool of borrowers that would no longer be able to access FHA for purchase mortgage and home refinance options. Most lenders who originate FHA loans in these high cost states agree that higher loan amounts who help many areas that were devastated by housing crisis. The movement to reinstate higher FHA limits is in full-swing in House and the Senate.  However it doesn’t appear that government sponsored enterprises like Fannie Mae and Freddie Mac would not be included in the measure or spending bill.

The loan limits fell from a maximum $729,750 to $625,000 on the first of October earlier this year. This affected 600 US counties for FHA, but less than half of that for Fannie Mae and Freddie Mac. FHA is not a lender rather an insurer of home loans for approved lending companies. It is currently the only low down-payment finance option left in the mortgage industry as they only require a 3.5% down-payment from perspective home buyers. The VA does offer 100% financing but it is only available to military borrowers.

Now the FHA market-share could expand even more because it would likely take over some of the share presently held by Fannie Mae and Freddie Mac. In a phone interview today, FHA commissioner Carol Galante said, “This is a scenario that has never happened in the past in which FHA has higher loan limits than Fannie Mae and Freddie Mac. According to mortgage analyst Brian Chappelle at Potomac Partners It could increase FHA volume by 10%.  “The higher loan limits would help raise FHA reserves if the defaults don’t increase. Every recent audit has said larger loan amounts perform better than smaller loan amounts says Chappelle. “If it wasn’t for the FHA loans insured in 2009-2011 FHA would already be needing taxpayer assistance.”

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October 3, 2011

Are FHA Mortgage Programs Performing?

Category: FHA,Published Articles – admin – 10:14 am

According to Paul Miller of FBR Capital Markets, the largest home loan lenders and servicers could be hit with another government loan default fiasco.  It seems that even with the low FHA rates, borrowers are still making payments late and defaulting.

In the wake of the Federal Housing Finance Agency’s mortgage lawsuits against Bank of America, Citigroup, JPMorgan Chase and a dozen other lenders, the nation’s largest banks could be facing a wave of losses on insurance claim denials by the Federal Housing Administration, or FHA.  Miller cited “conversations with industry and Washington contacts,” there is “a growing concern over the risk that FHA mortgages pose to originators and servicers,” since the agency “only a $4.7 billion capital buffer against a $1 trillion portfolio, which translates into a reserves to insured loan ratio, or capital ratio, of 0.50%, well below the 2% mandated minimum.”

This means the FHA could be forced to tap into its credit line with the Treasury in order to continue paying out on FHA lenders and servicers’ claims.

Since “the FHA needs to avoid tapping into its credit line to prevent comparisons to Fannie Mae and Freddie Mac,” according to Miller, the agency has increased its mortgage insurance premiums and increased borrowers’ down payment requirements. If those measures fail to shore-up the FHA’s finances, the analyst said “the agency could turn to widespread claim denials in order to reduce losses to its insurance fund.”  Miller said that the FHA’s focus in its efforts to deny more claims “will likely be on missteps made in the hyper technical servicing process,” although “the possibility remains that the agency could be looking for any mistakes made throughout the loan’s life, therefore exposing the lenders to losses as well.”  While providing detailed loss estimates for the largest mortgage lenders and servicers, the analyst said that “until there is more widespread evidence of FHA claim denials, we believe that the risk is more of a headline risk than a capital concern.” Read the original FHA Mortgage Mess article.

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March 1, 2011

FHA and Subprime Home Loans

Category: FHA – admin – 12:52 am

FHA home loans have become a trusted financing vehicle for borrowers with credit and equity obstacles. FHA mortgages are also popular with new home buyers that cannot afford a big down-payment like conventional loan typically require.  After the sub-prime mortgage crisis in 2007, FHA loans are in fact one of the only ways to obtain non-prime lending, as many lending practices were cut off as a result of the housing bubble. A subprime home loan offers new opportunities for people who want a house but cannot afford one, but one of the only subprime loan techniques still in practice is the FHA loan, although it is certainly a safer practice.  Read the Original article > The Truth behind Subprime and FHA Loans

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January 11, 2011

Outlook for FHA Home Loans in 2011

Category: FHA,Published Articles – admin – 10:32 pm

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July 13, 2010

Government Home Loan Programs

Government home financing has become a popular choice for home purchase and home refinancing.  The Federal Housing Administration offers consumers affordable home financing and they only require a 3.5% down-payment.  Homeowners that are seeking FHA refinancing may qualify for a rate and term or streamline refinance that also only needs 3.5% home equity.  Today, FHA mortgage rates are available at 4.5% on the 15-year fixed rate option and 4.75% on the 30-year fixed rate mortgage.

VA home loans are guaranteed by the Department of Veterans Affairs.  The VA mortgage is a unique option for first time home buyers, because it has a no-down-payment required for eligible veteran home buying.  VA mortgage rates are available at 4.375 on the 15-year fixed rate option and 4.625% on the 30-year fixed rate loan.  VA refinancing is also available at 100% with both rate and term and streamline refinance options.  Read the original article online at the Nationwide Mortgage Blog >  http://www.bdnationwidemortgage.com/blog/index.php/2010/07/government-mortgage-solutions-with-fha-and-va-home-loans/

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May 28, 2010

FHA Refinance vs Conventional Home Refinancing

Category: Conventional,FHA – admin – 12:38 am

In a recent article, Mortgage Refinancing Buzz compares conventional and FHA refinancing in a side by side analysis.  The mortgage advisor notes that both types of refinance loans have their pros and cons so it all comes down to selecting a refinance program that best meets you individual needs.  In 2010 there were many revisions to underwriting criteria for conventional and FHA loan requirements.  MRB recommends finding out what your loan qualifications are with a mortgage lender you trust.

A conventional refinance loan is a traditional mortgage used to refinance an existing mortgage that stays within the conforming loan limits of $417,000.  FHA streamline refinance allows FHA customers to refinance anytime the market rate drops into a position that would save them money.  During turbulent the FHA refinance loan provides some assurances that if the rates drop, the FHA borrower can reap the benefits.

Read the original Mortgage Refinancing Buzz article > Comparing Conventional Refinance Loans to FHA Refinancing

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February 3, 2010

Homebuyer Tax Credit Extended

According to data released by the Commerce Department’s Census Bureau and the Department of Housing and Urban Development, the expansion to the homebuyer tax credit, an exceptional government stimulus measure was passed to boost housing activity, new home sales took a 7.6% decline in December. The results come on the heels of National Association of Realtors (NAR) reports of similar December declines in existing home sales.  First time home buyer loans have seen a recent spike in loan application volumes since the tax credit news hit the street.

 

The homebuyer tax credit extended for first time homebuyers and expanded to include existing homeowners requires buyers have a contract in place by April 30 and close by June 30th. The problem, home-builder insiders and real estate agents tell HousingWire, is that consumers who tried to take advantage of the tax credit too late in the fall before realizing there wasn’t enough time to close a deal by the original November 30th expiration date have yet to reengage themselves in the home loan process.  FHA mortgage lending continues to support a majority of the first time homebuyer loans.  “With new homes, the home-builders ran out of everything they could close by the end of November,” Burns said. “There were people that wanted to buy in these communities that didn’t because they couldn’t close in time.”

As HousingWire previously reported, the JBREC December monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.

Another confidence booster is the tax credit many builders are receiving from the temporary extension of the terms of net operating carry-back laws, which let builder recoup losses from taxes paid in profitable years.  “It’s given them more confidence in their cash balances and they want to start more speculative homes because of the extra cash that they now have,” Burns said.

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January 22, 2010

FHA Underwriting Tightening

Category: FHA,Mortgage Industry News – admin – 5:53 pm

FHA announced they will continue to allow borrowers to finance the upfront mortgage insurance premiums.  FHA will pursue legislative authority to allow flexibility to bring the annual premium, which borrowers pay on a monthly basis, higher. Also, seller concessions will be reduced to 3% from 6%.  In a recent blog post, the FHA Mortgage Lending Blog stated that the Administration will expand mortgage refinance guidelines sometime in 2010.

Frank Black, who managed a Wells Fargo branch in California said, “After reviewing the changes to the FHA requirements, I believe FHA mortgage lenders will agree that the new rules make sense and are needed to keep the government financing alive. A few years ago, many brokers and lenders took advantage of FHA underwriting by pushing the envelope with risky home loans.”  See the original article > FHA Loan Guidelines Require 10% Down for Low Fico.

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October 13, 2009

House Passes bill to Increase FHA Multifamily Mortgage Limits

Category: FHA – admin – 11:21 pm

The House of Representatives has approved legislation authorizing the Secretary of Housing and Urban Development to substantially increase the FHA mortgage limits for elevator-type multifamily projects and for projects in New York and other high-cost areas.

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July 20, 2009

Home Mortgage Rates Remain Low

Mortgage rates in the U.S. fell to the lowest since May as mortgage refinance loans surged on reduced borrowing costs. The average thirty-year rate fell to 5.14% from 5.20%, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The fifteen-year mortgage rate was 4.63%.   “It’s been stuck in this low-five range for a number of weeks,” Donald Rissmiller, chief economist at New York-based Strategas Research Partners, said. “This is still a good interest rate.”  

The Mortgage Bankers Association’s index of home loan applications rose 4.3% to 514.4 in the week ended July 10. Purchase applications fell 9.4 % while requests to refinance gained 18%, indicating prospective buyers are still wary of falling home prices while property owners are taking advantage of low rates to reduce their monthly payments.  Kelly Media Group Founder, Jason Cardiff of the Mortgage Lead Company, said, “The result of lenders cutting fees will trickle down to homeowners and eventually provide a hedge against inflation for the rest of 2009.”

Federal Reserve Chairman Ben S. Bernanke is trying to reduce lending costs with a $1.25 trillion program to purchase securities backed by home loans. According to data compiled by Bloomberg, the worldwide credit crunch spurred by bad credit mortgages has cost the world’s financial firms almost $1.5 trillion in losses and more asset write-downs.

Last month, the Federal Reserve left the size of its buying program intact and kept the benchmark rate for federal funds at between 0 and 0.25 %. The rate will stay at “exceptionally low rate levels” for an “extended period,” the Federal Open Market Committee said in a statement June 24th.   “We’re going to see more of the same out of the Fed,” Rissmiller said. “They’ve been happy with what’s happened.”

April’s Record Low

Mortgage rates reached a record low 4.78 % twice in April after the central bank announced its plan to boost buying of both mortgage securities and Treasuries.   Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, allowing lenders to reduce mortgage rates on new home loans and still sell the securities at a profit. Home loan rates started climbing in May along with Treasury yields on investor concern that ballooning government debt would fuel inflation.

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June 23, 2009

10 Home Loan Tips for 1st-Time Home Buyers

Category: Consumer Tips,FHA,Home Loan News – admin – 7:28 am

If you are looking to make the move from a rented apartment to a home of your own, you are not alone. The convergence of low home prices, still-low mortgage rates and appealing tax incentives makes 2009 a good time to buy a home for many people. If you are looking to buy, here is what you need to know:

Home prices are low. Home prices dropped at a record annual pace of 18.7% this past March. That means discerning buyers can find real bargains. Mortgage interest rates are still relatively low. While interest rates have risen from their historic lows earlier this year, they still are appealing. In mid-June, rates hovered around 5.70% for a 30-year fixed rate home loan.

Tax credits will help. 1st time homebuyers can get money back from tax credits implemented as part of the 2009 American Recovery and Reinvestment Act. An $8,000 credit is available to 1st-time buyers for homes purchased before December 1, 2009. Home financing legislators are considering increasing the credit to $15,000 and expanding it to include other home buyers

Credit scores matter. While houses are widely available, home financing is limited to those with good credit. Credit scores range from 300 to 850, with the median U.S. credit score about 725. A score below 680 usually results in a higher interest rate or denial of credit. Check your credit score before you make any home buying decisions. If your score is lagging, wait a few months and work to improve the score by paying every bill on time, paying down as much debt as possible and disputing any erroneous information on your report. Note that it can pay to do your homework researching FHA mortgage rates and lenders — credit scores do not decline if multiple similar credit report requests are submitted within a close time period (usually a few weeks).

You must have savings. A down payment is essential today. Ideally, you can put down 20% of the purchase price (see #7 regarding PMI). If not, talk to your mortgage lender about your options.  Do not stretch too far. Standard underwriting guidelines call for keeping housing expenses below 35% of total income.

Understand private mortgage insurance (PMI). Home mortgages with less than 20% home equity (which means a 20% down payment for those purchasing a home) require PMI in case the owner defaults on the home loan. When the home owner pays a conventional home mortgage down to 80% or less of the home’s value, the home owner can request the home lender to cancel the PMI and then be able to stop paying the additional amount. Meanwhile, PMI is tax-deductible, at least through 2010.

Know the real costs of buying. The principal and interest on a mortgage payment are only the beginning of home-related costs. Escrow payments – the funds withdrawn to cover home insurance and taxes – and PMI can add a few hundred dollars per month to a mortgage payment. In addition, home owners must pay for repairs and maintenance. A rule of thumb is to budget 1% of the home’s purchase price per year for upkeep.

Know whether you can pay off early. If the mortgage loan has a prepayment penalty, borrowers face hefty charges if they pay it off early. This provision also can apply to future mortgage refinancing, so be forewarned. Review Truth in Lending disclosures to find out.  Read the full article online, > 10 Home Loan Tips for 1st-time Home Buyers

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