Articles Published in: June 2012

June 19, 2012

FHA Home Loans and Loan Modification Scams: Important Information from FHA/HUD

According to the Department of Housing and Urban Development, loan modification scams were so prevalent last year that such schemes made the Better Business Bureau’s list of top scams for 2011. FHA borrowers are not immune from such scam attempts; homeowners complain routinely about contacts from companies claiming to represent the FHA, HUD, and a variety of private lenders. The official site for the Federal Bureau of Investigation warns borrowers to get professional references from any third party contacting them with unsolicited offers of help. The FBI also cautions FHA and conventional borrowers, “…if you

June 18, 2012

FHA Rescinds Pending Changes To Loan Rules on Collections and Judgments

By Joe Wallace

In March of 2012, we reported the FHA’s pending changes to the rules regarding collections and judgment actions–changes which have been cancelled, at least for now, by the FHA and HUD. According to FHA Mortgagee Letter 12-03, there were important changes to the rules for borrowers with court judgments and/or collection actions on their record scheduled to take effect in July of 2012. Those changes included the following: “If the total outstanding balance of all collection accounts is equal to or greater than $1,000 the borrower must resolve the accounts (e.g. entered into payment arrangements with minimum three months verified payments- paid as agreed) or paid in full at the time of, or prior to closing.

June 15, 2012

Important New HUD Rules For LGBT Home Buyers Seeking FHA Home Loans

By Joe Wallace

There are federal laws in place to prevent housing discrimination on the basis of race, color, creed, national origin, religion, and any number of other factors which have nothing to do with a borrower’s financial qualifications for credit. The Fair Housing Act is one such law, but many other rules apply. No matter if a borrower is applying for a conventional home loan, a VA guaranteed mortgage or an FHA mortgage loan, lenders, brokers, agents, landlords and other parties cannot discriminate in any aspect of the housing process. That said, one important set of protections has been, until recently, missing from the rulebooks for those in need of FHA/HUD services and programs. But in recent times, the Department of Housing and Urban Development has finalized a new set of rules | more...

June 14, 2012

FHA Loan Questions: Can The Lender Include Closing Costs Into My Streamline Refinancing Loan?

By Joe Wallace

A reader asks, “I’m in the beginning process of doing a FHA streamline refi and from the articles I’ve read “FHA doesn’t allow lenders to include closing costs in the new mortgage amount of the streamline refinance.

June 13, 2012

Reader Question: FHA Loan Credit Requirements

By Joe Wallace

A reader asks: “The FHA approves people with poor credit. I see on the website that FHA is getting home loans, can you tell me what are your credit guide lines?” FHA loan rules establish minimum credit requirements for loan approval, but borrowers should know that it’s a mistake to assume an FHA guaranteed mortgage is a “bad credit home loan” or similar products. Banks that participate in the FHA loan program have their own credit requirements–they are not forced to issue home loans to borrowers that don’t meet the financial institution’s minimum credit score requirements for home loans even if the borrower technically meets the FHA minimum credit score cutoff. That’s one reason why borrowers are encouraged to contact the FHA directly (1-800-CALL FHA) to learn about and arrange | more...

June 13, 2012

FHA Loan Reader Questions: Can I Buy Another Home With An FHA Mortgage Loan?

By Joe Wallace

A reader asks, “We purchased our first home using an FHA loan – 5% down. We have outgrown our home due to an expanded family and we are looking to purchase another home that is bigger – is it possible to qualify for another FHA loan – we have at most 10% to put down towards a new home. Our plan would be to rent out this current home we have as it is in a good rental area. Any advice on how we can achieve this?” FHA loan rules, according to the official site at FHA.gov, include a restriction on issuing single-family mortgage loans to investors. Due to this restriction, the official site says, “FHA generally will not insure more than one mortgage for any borrower (transactions in which | more...

June 12, 2012

Bank Of America Settles Maternity Discrimination Claim

By Joe Wallace

A recent press release found at the official site for FHA/HUD announces, “Bank fund will compensate women denied loans because they were pregnant or on maternity leave”. According to the HUD press release 12-095, “The U.S. Department of Housing and Urban Development (HUD) announced today that Bank of America has agreed to pay up to $161,180 to settle allegations that one of the bank’s San Jose, California branches refused to refinance the mortgage of an Irvine woman because she was on maternity leave. HUD reached the agreement with Bank of America to resolve a Fair Housing Act complaint that had been filed by the Fair Housing Council of Orange County (FHCOC).” Those applying for any kind of home loan–including FHA guaranteed mortgages–may not be discriminated against due to pregnancy, family | more...

June 11, 2012

FHA Loan Reader Questions: Cash-Out Refinancing LTV Ratios

By Joe Wallace

A reader asks, “Can you explain the 95% LTV cash out refinance? When I talk with lenders they all say 85% is the maximum LTV for a cash out refinance. Thank you.” One official document published by the FHA, called the FHA Refinance Programs Comparison Matrix states under the heading Eligible Loan Types for an FHA Cash-Out refinancing loan at 95% LTV, ” FHA or conventional loan that is seasoned at least 12 months with last 12 payments made within the month due.

June 8, 2012

FHA Loans: Settlement Fees Required to Close The Deal

By Joe Wallace

FHA loan rules include guidelines on the settlement fees required to close the loan so the buyer can take possession of the property. For example, FHA loan rules state, “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan”, but the very next line in those rules add, “Borrowers may not pay a tax service fee.” Borrowers who want to know the fees they are required to pay should take note; FHA loan rules say the lender is required to include “the sum of all fees and charges from origination-related charges in Box 1 on page 2 of the Good Faith Estimate (GFE).” What can those fees include? According to HUD 4155.1 Chapter 5 Section A “In addition to the minimum downpayment | more...

June 7, 2012

FHA Loans: Can Non-Taxable Income Be Used To Qualify For an FHA Home Loan?

By Joe Wallace

FHA loan rules require the lender to verify income sources listed on an FHA home loan application. Only income that the lender deems stable, reliable, and likely to continue can be used to qualify for the loan. Because of this, the FHA loan program has rules covering different types of income and what may or may not be used to qualify for the loan. Income that does qualify is used to calculate the borrower’s debt-to-income ratio–a critical part of the loan approval process. Too much debt and not enough income, and a borrower could face being rejected for the FHA mortgage. One area some borrowers have concerns with is the income from non-taxable sources such as Social Security payments, military allowances, government benefits and other sources. These income sources, when | more...