Articles Published in: September 2013

September 18, 2013

FHA Loan Reader Questions: Old Foreclosures

A reader asks, “Is a person eligible for an FHA loan if they had one 20 years ago that went into foreclosure?” FHA loan rules address the issue of past foreclosures on FHA home loans in HUD 4155.1, Chapter Four Section A. It states: “If the borrower has had past delinquencies or has defaulted on an FHA- insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage.” Additionally, “The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures. Lenders should contact the Homeownership Center (HOC) having jurisdiction over the area where the property subject to default is located for information such as the • date | more...

September 17, 2013

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

By Joe Wallace

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28: performing the credit history analysis. performing the cash flow/residual income analysis; documenting and verifying credit, income, assets and property charges evaluating extenuating circumstances | more...

September 16, 2013

FHA Loan Credit Questions–What Affects Your Chances Besides FICO Scores?

By Joe Wallace

A reader asks a question about FHA credit requirements, and starts out by quoting one of our past replies to a reader question about FHA credit rules. Here’s the quote: “FICO scores are not the only issue examined on a credit application. To infer that simply by raising FICO scores for the loan application in question, the loan might be approved with the minimum down payment in this case would be misleading–there are many factors that affect your credit worthiness in the eyes of a lender, FICO scores are just one of those factors…..” The reader asks, “Which factors exactly affect one’s creditworthiness in the eyes of a lender besides FICO scores?” There are many factors that could affect a lender’s view of an individual borrower’s creditworthiness. Some are known | more...

September 13, 2013

Can a VA Borrower Have More Than One FHA Loan at a Time? The Rules

By Joe Wallace

One of the more common questions we’ve been asked recently is connected to FHA loan rules about investment properties and whether or not an FHA borrower can have more than one FHA-insured home loan at a time. According to the FHA official site, “To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).” There are some exceptions, though. The FHA official site features a Q&A section about FHA loans that includes this quote, saying “We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer’s needs and resources” as described by FHA | more...

September 12, 2013

FHA HECM Program Changes: Mandatory Obligations

By Joe Wallace

Recently the FHA and HUD announced changes to the FHA Home Equity Conversion Mortgage, also known as HECM. Those changes include new guidelines for the maximum amount of HECM loan funds that can be transferred to the borrower at the time the HECM loan closes or within the first 12 months of the HECM loan, as well as “what fees and charges are considered Mandatory Obligations” according to the new rules. According to FHA mortgagee letter 2013-27, a new “Single Disbursement” lump sum payment may be possible for borrowers applying for both adjustable and fixed interest rate HECM loans applicable for all FHA HECM loan case numbers assigned on or after September 30, 2013. “This payment option will be limited to a single disbursement at loan closing which cannot exceed | more...

September 11, 2013

FHA Loan Rules Updated: Maximum Loan Amounts For Streamline Refinancing

By Joe Wallace

The FHA and HUD have updated some of the rules used to calculate maximum mortgage loan amounts for FHA Streamline Refinancing loans. According to Mortgagee Letter 2013-29, there are new guidelines to lenders on how the maximum amount is calculated, and what can be included in the loan amount when calculating the mortgage amount. “Mortgagees are reminded that when processing an FHA-insured streamline refinance mortgage, the new maximum mortgage amount must always be calculated starting with the outstanding principal balance on the existing mortgage, not with the payoff amount for the existing mortgage.” Borrowers should know the difference between the outstanding balance and the payoff amount. According to the Consumer Financial Protection Bureau (CFPB) official site, “Your payoff amount is how much you will actually have to pay to satisfy | more...

September 11, 2013

FHA Home Equity Conversion Mortgage Loan Program Changes

By Joe Wallace

Recently the FHA and HUD issued a press release announcing changes to the FHA Home Equity Conversion Mortgage (HECM) program. While the entire list of changes is far too extensive to cover in a single post, we want to list the most important ones over a series of posts. According to the FHA/HUD press release, the recent changes are, “part of the Department’s continuing effort to reform, strengthen and protect FHA’s Mutual Mortgage Insurance (MMI) Fund” that are intended to “realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” according to Federal Housing Commissioner Carol Galante. “Our goal here is to make certain our reverse mortgage program is a financially sustainable | more...

September 10, 2013

HUD Announces Changes To FHA Home Equity Conversion Mortgage Program

By Joe Wallace

The FHA and HUD have announced changes to the FHA Home Equity Conversion Mortgage program designed to manage risks and make the program more secure. According to a press release issued recently, the new rules will, “manage risk associated with the Federal Housing Administration’s (FHA) reverse mortgage or Home Equity Conversion Mortgage (HECM) Program. This is part of the Department’s continuing effort to reform, strengthen and protect FHA’s Mutual Mortgage Insurance (MMI) Fund” “The changes being announced today will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” said Federal Housing Commissioner Carol Galante. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for | more...

September 9, 2013

FHA Loans, Late Student Loan Payments, and Home Loan Approval: A Reader Question

By Joe Wallace

A reader asks, “My wife and I are trying to get a FHA loan. Me as the primary borrower and her as co-applicant. She has lates on her student loans, which have been consolidated and are current for the last 8 months. we provided the lender a letter of explanation, detailing the reason she was late…underwriter has made a decision to deny, stating the reason was/is not good enough. Is there anything we can do?” There are two important things a borrower should consider when applying for an FHA mortgage in circumstances like these. The first is that not all lenders have the same standards. The financial institution that turns you down today may have more strict requirements than the one that offers you an FHA mortgage tomorrow. It’s very | more...

September 6, 2013

FHA Loan Rules on Second Loans: A Reader Question

By Joe Wallace

A reader asks, “I am a co-borrower on another FHA loan. Do I not have the right to acquire a FHA loan where I would be the primary borrower and the secondary residence would be my primary residence? I was informed I could not have or be on two FHA loans by my tentative mortgage company.” FHA loan rules covering issues like these are found in HUD 4155.1, Chapter Four Section B. It states, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower.” “FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the | more...