Articles Published in: March 2011

March 14, 2011

FHA Rules for Automatic Inspections

The FHA has standards for appraisers that mandate an “automatic inspection” if certain conditions are detected. In 2005, the FHA modified some of those policies for existing construction buildings to eliminate an “automatic inspection” requirement. “In a continuing effort to reform and standardize its appraisal requirements, FHA has shifted from its historical emphasis on the repair of minor property deficiencies and now only requires repairs for those property conditions that rise above the level of cosmetic defects, minor defects or normal wear and tear.” The FHA adds, “FHA Roster Appraisers are reminded to report all readily observable property deficiencies…” according to FHA Mortgagee Letter 05-ML-48. Termite inspections, for example, are one area that changed under the new rules for existing construction housing being reviewed for an FHA mortgage loan. The | more...

March 12, 2011

FHA Reverse Mortgages: What Makes Them Come Due?

By Joe Wallace

One of the most attractive features of an FHA reverse mortgage for some applicants is that the loan does not come due until the applicant dies or sells the property. There are no monthly mortgage payments on an FHA Reverse Mortgage, also known as an FHA Home Equity Conversion Mortgage. Instead, the loan is paid off as described above (when the owner dies or sells the home). The borrower–who must be age 62 or older–gets the proceeds from the loan to use as needed. But there are issues which could make a HECM loan due immediately–what could force the lender to call in the loan immediately? There are several scenarios. The terms of an FHA reverse mortgage require timely payment of property taxes, hazard insurance, and any other financial obligations | more...

March 11, 2011

FHA Advice: Don’t Pay For Foreclosure Avoidance Counseling

By Joe Wallace

There are many ads on television by private companies offering debt counseling services. But when it comes specifically to foreclosure avoidance, did you know you do not have to pay for counseling services? According to the FHA official site, “Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks

March 10, 2011

More on How the FHA Protects Borrowers From Loan Fraud

By Joe Wallace

In our last blog post, we discussed how the FHA protects borrowers from loan fraud. FHA regulations and requirements are designed to protect both borrower and lender.

March 10, 2011

How Does the FHA Protect Borrowers From Loan Fraud?

By Bruce Reichstein

The FHA issues warnings to consumers about predatory lending, but many people don’t know what predatory lending practices are until there’s a string of headlines about one specific type of activity. Protecting yourself against fraud and unethical practices in the real estate business is much easier when you know what to look for. It’s not that the real estate business is rife with dirty tricks–it likely suffers from the same amount of fraud as any other major industry–but the stakes are obviously much higher when it comes to buying a home. That’s why the FHA has requirements in place to protect the borrower. Look at the types of fraud sometimes found in the marketplace and compare the FHA rules to those governing other types of loans and you’ll see a | more...

March 8, 2011

FHA Loans, Predatory Lending, and Borrower Protection

By Bruce Reichstein

FHA loans are not immune from the attentions of con artists, scammers and fraudsters. The FHA does actively investigate claims of fraud, discrimination or abuse of the FHA loan system, but the borrower is sometimes the first line of defense when it comes to avoiding scams or predatory business practices. New FHA loan applicants are often the most vulnerable because they’re in the process of learning how FHA loans work. Scammers are aware of this and try to use it to their advantage. That’s one reason why the FHA encourages borrowers to attend home ownership education classes and credit counseling courses offered by HUD approved non-profit agencies. The information a new borrower learns in these classes helps first-time home buyers understand their rights, responsibilities, and the rules of FHA mortgages. | more...

March 7, 2011

FHA Refund Facts

By Joe Wallace

When purchasing a home with an FHA loan, one of the requirements is to pay an Up Front Mortgage Insurance premium or UFMIP. FHA mortgage loan applicants must budget for both an UFMIP and a monthly mortgage insurance payment that goes towards the annual Mortgage Insurance Premium. After a certain amount of time, some borrowers may be eligible for an FHA mortgage insurance premium based on a set of qualifying factors from the FHA. FHA Refund Fact—FHA borrowers may be eligible for a partial refund of their insurance premium if the loan closed after September 1, 1983 AND UFMIP was paid at closing time. FHA Refund Fact–this refund is available only to those who meet the qualifying criteria listed above AND who did not default on mortgage payments at any | more...

March 7, 2011

FHA Appraisal Fee Facts

By Joe Wallace

The FHA loan process includes an appraisal of the property to be purchased. This appraisal is performed by an FHA approved professional and the loan cannot move forward without it. The appraisal is a critical part of the process for two reasons–it establishes that the property meets the FHA minimum property requirements and establishes a fair market value for the property. Once the fair market value is known, the FHA loan amount can be approved, provided the borrower has meet all FHA requirements for creditworthiness and other factors. FHA Appraisal Fact–The Borrower Pays For The Appraisal The FHA allows the lender to charge the borrower for the FHA appraisal. This is a standard part of the loan process. There are many reasons why this cost must be handled by the | more...

March 4, 2011

More on FHA 203(h) Loans

By Bruce Reichstein

In a recent blog post, we discussed the basics of the FHA 203(h) loan, which insures mortgages taken out by people who have lost property in a major disaster. The FHA 203(h) program allows FHA-qualified lenders to offer FHA loans to specifically to those who have either lost their homes in the disaster or have had extensive damage to the home. The FHA rules for 203(h) loans say, “Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area…(these) mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner.” There are important things to remember about 203(h) loans. Some financial institutions instruct their lenders | more...

March 3, 2011

FHA Mortgage Insurance Annual Premium Increase

By Joe Wallace

Starting with FHA loans with case numbers assigned April 18, 2011, the FHA annual mortgage insurance premium will increase. At the time of this writing, no increases in the FHA Up Front Mortgage Insurance Premium are planned, but new borrowers will have the annual mortgage insurance calculated with an additional 25 “basis points”. FHA loan mortgage insurance is calculated using basis points, which vary depending on the type of loan being applied for based on the loan-to-value ratio. The annual insurance rate is calculated by taking the base mortgage (sale price of the home minus the down payment) and multiplying it by the basis points. While an increase of 25 basis points may sound like a lot to those new to the FHA loan process, a mortgagee letter from the | more...