Articles and news about FHA loans and HUD requirements. FHA loans are great for first-time homebuyers.

Monthly Archives: August 2011

FHA Assistance For Iowa Storm Victims

Hurricane Irene and its aftermath have dominated headlines in the last part of August 2011, and while recovery efforts continue other communities are also getting assistance for non-hurricane related issues.

The most recent press release from the FHA and Department of Housing and Urban Development announced FHA help for Hurricane Irene victims in Puerto Rico, but in Iowa, help is also on the way for those who experienced storm and flood damage from weather problems in July.

According to HUD press release 11-176, “HUD will speed federal disaster assistance to the State of Iowa and provide support to homeowners and low-income renters forced from their homes following severe storms, straight-line winds, and flooding during the period of July 9-14, 2011.”

On August 30, 2011, President Obama declared federal disaster areas in Benton County, Iowa, as well as Clay, Dickinson, Marshall, Story, and Tama. The HUD press release says, “The President

Shopping Around for an FHA Home Loan

If you are a first-time house hunter interested in buying a home with an FHA-insured mortgage, there are several things you should know about the FHA home loan process. It’s easy to assume that because a lender is FHA-approved, they offer the same services, rates and other features as any lender participating in the FHA loan program. But is that a safe assumption to make?

Borrowers should know before applying for an FHA home loan that the FHA loan program is voluntary–the government does not require lenders to participate. That means a lender is free to withdraw from the program and stop offering new FHA home loans. Banks that do participate must comply with FHA regulations, the Fair Housing Act, and other rules.

So while borrowers can safely expect an FHA loan application process that is fair (and get recourse for one that is not), it’s not a good idea to assume rates and terms are identical.

That’s because the FHA and HUD do not set interest rates, establish specific dollar amounts for FHA loans, or issue credit. The FHA administers the program, sets regulations and standards, and approves loan applications where required. The individual lender negotiates interest rates with the buyer and establishes terms based on FHA requirements and local market conditions.

The FHA’s own literature encourages buyers to do comparison shopping. Some of the major areas to concentrate on are interest rates, discount points, and private mortgage insurance fees. You may, depending on your credit information, be eligible for a more competitive interest rate, but rates differ from lender to lender. Never assume that the interest rate you’re quoted at one financial institution is the only one available or the best on you can get.

Some information–like interest rates–can change on a daily basis, so it’s good not to let too much time pass when checking those details. As you get close to making a commitment on a particular lender, ask how long a quoted rate would be in effect should you decide to fill out an application.

There are many other smart shopping tactics to consider when buying a house, and the FHA offers free home buying counseling information for those who want more ideas when starting the search for a home.

Emergency Homeowners’ Loan Program Extended

Qualified FHA borrowers at risk of foreclosure on FHA mortgages could find help from the Department of Housing and Urban Development. According to a press release from FHA/HUD, FHA borrowers in 27 states and Puerto Rico have another chance to apply for funding from the Emergency Homehowners’ Loan Program.

In a release dated August 29, 2011, it was announced, “The U.S. Department of Housing and Urban Development and NeighborWorks America today reopened the application process for the Emergency Homeowners

FHA Loan Resources For Those Affected By Recent Hurricanes and Other Natural Disasters

2011 has brought one of the worst summers on record for homeowners–hurricanes, floods, and other disasters have given FHA borrowers plenty to worry about when it comes to their property.

The FHA has a lot of resources that can help. Borrowers who need assistance in the wake of disasters can find a wealth of information, application forms and counseling online.

Some excellent general assistance is available at http://www.katrinarecovery.disasterhelp.gov/, which was originally set up to assist those recovering in the aftermath of Hurricane Katrina. Another resource many are in need of, especially in the early days of disaster recovery, is assistance with emergency housing and registering with FEMA. Get help with those issues, plus much more at the Department of Housing and Urban Development’s official help page.

In federally-declared disaster areas such as the 2011 sites in Kentucky, New Hampshire, Wyoming and many others, the FHA has issued foreclosure moratoriums and other actions designed to help borrowers in need of mortgage relief. Call 1-888-297-8685 to find out what options may be available to you in your location.

The FHA offers rehab loans for those affected by disasters. The FHA 203(k) rehabilitation loan is available from FHA-approved lenders and can help qualified borrowers with the costs of restoring a property damaged in a storm or other disaster. Additionally, FHA offers additional help by providing funds to local agencies for disaster relief grants and/or loans. Check with your local government information websites or telephone centers for details on local disaster recovery programs.

One important area that’s easy to overlook in the disaster recovery effort? Taxes. If your home was damaged or destroyed by a natural disaster, you could be eligible for a tax break. The IRS calls this a tax deductible casualty loss, and there are specific rules you need to know before making a claim.

The information presented at http://www.hud.gov/katrina/taxpub4512c.pdf was intended for those filing their 2006 taxes, but many of the same rules could apply to your situation if you qualify. Ask your tax preparer for more information or contact the IRS directly to get more details.

FHA Borrowers Beware: Fraudsters Targeting Homeowners In Trouble

FHA and conventional borrowers in California and elsewhere have been targeted by alleged scam artists claiming to help borrowers avoid foreclosure by adding their names to lawsuits (for a fee) against financial institutions.

According to an August 19, 2011 L.A. Times article by E. Scott Reckard, the California Attorney General is pursuing actions against a group of Southern California lawyers and their associates for such activities.

The action stems from situations where homeowners were allegedly tricked into paying up to $10 thousand each to be included as plaintiffs in lawsuits. According to legal paperwork filed in Los Angeles County Superior Court, “Consumers are led to believe that joining these lawsuits will stay foreclosures, reduce their loan balances, entitle them to monetary benefits and potentially get them their homes free and clear of their mortgage…”

The homeowners targeted in the alleged scheme were spread across 17 states and more than 2,000 home owners are said to be victims according to the California Attorney General.

Part of the scheme included direct mail advertising or other types of contact sent by mail claiming the borrowers were “potential plaintiffs” in nationwide litigation, but according to the lawsuit brought by the Attorney General of California, no settlements are actually available and in some instances there is no record of any lawsuit ever initiated on behalf of the plaintiffs.

FHA borrowers should beware of any foreclosure avoidance scheme which requires the borrower to pay a third party other than the mortgage company unless that third party has been specifically approved of by the lender. Borrowers in trouble should contact the FHA for advice and get an FHA-referred housing counselor to explain options to avoid default or foreclosure on an FHA home loan.

FHA Loans: What Does It Mean To Be Listed in CAIVRS?

Any type of home loan includes a credit check, including FHA insured mortgages. But FHA loans include an extra requirement when it comes to credit–the borrower is not eligible for an FHA mortgage if he or she is delinquent on any type of federal debt.

An FHA approved lender is required to check to insure the borrower is not delinquent on any debt owed to the government; that check is done using a system called CAIVRS, which stands for Credit Alert Interactive Voice Response System.

This system provides a list of all people currently in default on an FHA insured mortgage, those who have had a government-backed home loan foreclosed on in the last 36 months, and those who are delinquent on a debt owed to the government.

According to the FHA official site, “Examples of Federal debts include previous FHA or Veterans Administration home loans, Federal student loans, Small Business Administration loans and similar types of debts.” That means an a FHA loan applicant could be in danger of having a loan denied if they are delinquent on a student loan–even if only for a small amount. Borrowers delinquent on paying Federal taxes may also be turned down for an FHA loan.

Borrowers listed in CAIVRS

FHA Condo Loans and Conversion Projects

FHA loans aren’t just for typical suburban homes–borrowers can apply for an FHA insured mortgage on many different types of properties, including condominium projects.

It would be easy to assume that FHA loans are only for existing condo projects since FHA guidelines state all condo loans may be issued only on FHA-approved condos. But FHA loans may also be issued for condo conversion projects if they are approved and meet FHA requirements.

One of the first hurdles for a condo conversion project to clear in order to be considered for an FHA insured condo loan is the definition of “conversion”. According to FHA rules, “Conversion to a condominium regime occurs in those projects which involve

New FHA Loan Limits: How Do They Affect HECM Loans?

Recently the FHA issued a press release announcing new FHA limits which take effect October 1, 2011. On that day, single family loan limits in high-cost counties would be lowered, but the majority of the country would see no change to FHA loan limits, according to the FHA official site.

The new loan limits were originally implemented in 2008 as part of the Housing and Economic Recovery Act, but those limits were delayed under the Economic Stimulus Act of 2008.

Under the new FHA loan limits, “The current standard (floor) loan limit for areas where housing costs are relatively low will remain unchanged at $271,050 for one-unit properties.

FHA Loan Modifications: When Does a Trial Payment Plan Fail?

In a recent blog post we discussed FHA loan foreclosure avoidance options, and what happens when a lender agrees to work with the borrower to do a trial loan modification. In some circumstances a borrower is required to complete a trial payment plan successfully before a more long-term loan modification program can begin.

According to the FHA, “A trial payment plan is an important tool for confirming a mortgagor

FHA Announces New Loan Limits Effective October 1, 2011

The FHA has issued a press release detailing changes to the FHA loan limits. The new limits will be lower in high-cost counties unless Congress introduces legislation to change the loan limits.

According to a Friday, August 19, 2011 press release, “On October 1, 2011, the Federal Housing Administration (FHA) will implement new single-family loan limits as specified by the Housing and Economic Recovery Act of 2008 (HERA).