Articles Tagged With: Borrower’s Rights

November 12, 2013

Current FHA Loan Rules For Applying For A New Loan After a Short Sale

Mortgage loan rules can change over time for a variety of reasons. Borrowers who researched their loan options a year or more ago may be surprised to learn that the rules that applied at the time they explored their options may have changed due to regulatory requirements, financial institution policies, or FHA program rule updates. With that in mind, here is the current FHA guidance regarding a borrower’s options for applying for a new FHA mortgage loan following a short sale. FHA loan rules published in HUD 4155.1 state that while having a short sale on your financial record is not grounds in itself for disqualifying a borrower, certain requirements and restrictions may apply. “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale | more...

November 8, 2013

FHA HECM Loans

By Joe Wallace

FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans: Traditional (Equity in current property used to obtain a new HECM loan) Purchase (HECM loan proceeds used to purchase a principal residence) Refinance (Refinance of an existing HECM loan with a new HECM loan) The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM: 1 Unit (Single Family Residence) 2-4 Unit with one unit occupied by the borrower HUD-approved Condominium Project Manufactured home built after June 15, 1976 Borrowers who are age-eligible to | more...

November 7, 2013

FHA Loan Reader Questions: Buying a Home After Chapter 7

By Joe Wallace

A reader asks, “We filed Chapter 7 with a house 1 1/2 years ago. How long after bankruptcy do you have to wait I have been told 1 yr then 2 years now 3 years? I would like to buy a home again and I am trying to find out what I must do I was told by one lender that I must rent a home for one year and reapply for credit for also one year before I can apply for a mortgage is there any truth in this? Should I just try to apply for a pre-approval and see what happens and if I do will that hurt my credit score?” The basic question about applying for an FHA home loan after a Chapter 7 bankruptcy has a | more...

November 7, 2013

FHA Clarifies Foreclosure Rules

By Joe Wallace

The FHA has updated its loss mitigation rules for the foreclosure process. FHA Mortgagee Letter 13-40, which supersedes or overrules previous or contradictory FHA foreclosure rules, has a collection of guidance for lenders. Some of that guidance is very important for borrowers who may be facing foreclosure on FHA mortgages to understand fully. According to the publication, “Effective loss mitigation is essential to stabilizing communities affected by natural disasters, poor housing market conditions, etc. Therefore, servicers are reminded that participation in FHA’s Loss Mitigation Program is not optional, they are to inform borrowers of and evaluate them for each loss mitigation retention and non-retention option1 in a timely manner.” The clarified loss mitigation procedures include direct instructions to the lender on when and how foreclosure proceedings may take place. “Pursuant | more...

November 1, 2013

FHA Refinancing Loan Basics

By Joe Wallace

There are several different types of FHA refinance loans. One is known as an FHA Streamline Refinance, which is for borrowers with existing FHA mortgages. Another is the FHA’s cash-out refinancing option, and there’s also a no cash-out refinance loan where proceeds of the loan are used to pay closing costs and other expenses related to the new loan. Streamline loans can be offered with or without an appraisal, while cash-out and no cash-out loans both require one. The term of these refinancing loans depends on the type of loan. The FHA loan rules for refinancing loans are found in HUD 4155.1, which says, “The maximum term of any refinance with an appraisal is 30 years. The maximum term of a streamline refinance without an appraisal is limited to the | more...

October 31, 2013

FHA Loan Mortgage Insurance: A Reader Question

By Joe Wallace

A reader asks, “Veterans are not required to purchase mortgage insurance with a VA loan. Is there a way that a veteran can be exempt from the mortgage insurance premium? The mortgage insurance is very high.” The short answer to this reader question is “no”. FHA loans are not designed the same way that VA home loans are–FHA loans require a Mortgage Insurance Premium (MIP), where VA home loans do not. Veterans should consider their options between VA home loans and FHA mortgages carefully. In some cases a veteran or currently serving military member could choose an FHA loan over a VA mortgage, for a variety of reasons. But a borrower faced with these choices should make the most informed decision possible. FHA home loans do have certain similar features | more...

October 24, 2013

FHA Special Forbearance For Unemployed Borrowers Extended

By Joe Wallace

Earlier this year, the FHA indefinitely extended its special forbearance programs for unemployed borrowers. In a mortgagee letter titled, “Extension of Unemployment Special Forbearance” the agency has created an open-ended policy as described below: “The policies in Mortgagee Letter 2011-23, (Unemployment Special Forbearance: Temporary Program Changes and Clarifications) relating to special forbearances for unemployed borrowers are hereby extended until amended, superseded, or rescinded.” The policies mentioned above also include a reference to an earlier Mortgagee Letter. “In ML-2000-05, FHA provided mortgagees with additional guidance concerning the Loss Mitigation Program that all mortgagees must follow, when applicable, to reduce FHA insurance losses in those circumstances, as determined by the mortgagee, where delinquent mortgagors might be able to find an alternative to foreclosure.” “ML 2002-17 amended ML 2000-05 to allow mortgagees to | more...

October 24, 2013

FHA Updates Guidance For Superstorm Sandy Repairs Under 203(k) Loan Program

By Joe Wallace

Just as the government shutdown crisis was unfolding, the FHA was preparing an update to policies that affect borrowers who need to apply for FHA 203(k) mortgages as part of their recovery from Super Storm Sandy. Unfortunately, that press release likely got overlooked by many because of the government shutdown issue. That update, as described in FHA Mortgagee Letter 2013-36, titled, “Eligible Properties in Presidentially Declared Major Disaster Area Super Storm Sandy for 203(k) insured mortgages” describes some very important updates. These updates specifically pertain to those seeking FHA 203(k) loans in areas affected by Sandy–they do not apply to other borrowers outside this area. According to the mortgagee letter, “Handbook 4240.4 Section 1-4 currently states that, homes that have been demolished, or will be razed as part of the | more...

October 22, 2013

FHA Loans After Bankruptcy: A Reader Question

By Joe Wallace

A reader asks, “What is the length of time after filing bankruptcy that you have to wait to qualify for a FHA loan…during that waiting process, what are some of the things that I should be doing to make the approval process easier and making my credit better?” FHA loan rules and lender standards are both considerations in situations like these, as is the specific circumstances of the individual’s bankruptcy and other credit issues. Borrowers should know that FHA minimums are just that–minimums. Lenders can and often do require higher standards. That’s why it’s important to consider shopping around for a lender who may be more willing to work with you–one lender may not be able to help, while another can, depending on your situation. For the record, FHA loan | more...

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land

By Joe Wallace

EDITOR’S NOTE: This article was written before changes to FHA loan rules made the old FHA Lender’s Handbook referenced in this article obsolete. The new FHA Single-Family Home Loan Rules are found in HUD 4000.1 and there have been many updates and changes to FHA home loans including One-Time Close Construction mortgage rules. Learn about the most up-to-date information on FHA Construction loans for borrowers who want to build on their own lot. ——- (The information below is no longer up-to-date, but we retain the original article here for archival purposes.) A reader asks, “I am looking to move back home, to where my grandma resides. her home of 45+ years is in disrepair. I filed bankruptcy two years ago, the one where you dont make trustee payments. My question | more...