Articles Published in: September 2012

September 28, 2012

Foreclosure Avoidance Counsleing on FHA Home Loans: Should I Pay For Assistance?

Aside from getting the FHA home loan itself, one of the most important benefits to having an FHA mortgage is the availability of free foreclosure avoidance counseling for home owners who need it. FHA.gov reminds borrowers that it is not necessary to pay fees to third-party foreclosure avoidance agencies. Plenty of free counseling and assistance is available from the FHA and HUD. On the FHA official site, under the page titled “Consumer Fees For Housing Counseling” you’ll find the following: “Foreclosure prevention counseling and homeless counseling services are available free of charge through HUD’s Housing Counseling Program. Housing Counseling agencies participating in HUD’s Housing Counseling Program are not permitted to charge consumers for these specific housing counseling services. (Emphasis ours.) Counseling recipients should not pay for these services.” That’s not | more...

September 27, 2012

FHA Issues Guidance To Lenders On Hazard Insurance Payments Following Hurricane Isaac

By Joe Wallace

The FHA has issued a reminder to lenders to “quickly release hazard insurance payments” to affected borrowers trying to recover from Hurricane Isaac. According to an FHA press release, HUDNo.12-156, the FHA wants to “reinforce its existing policy requiring lenders to release insurance payouts to homeowners eager to rebuild their damaged homes following disaster.” The release states, “In the past, the U.S. Department of Housing and Urban Development (HUD) noticed some lenders would instead use these insurance funds to pay off the outstanding mortgage balance, leaving many homeowners without the resources they need to rebuild their homes.” Carol Galante, FHA

September 26, 2012

FHA Loan Rules For Principal Residences

By Joe Wallace

A recent reader question about FHA loan requirements for occupancy begs the question; what does the FHA consider a “principal residence” or “primary residence” and will the FHA approve of a second FHA mortgage for those who purchase single-family, owner-occupied property? According to the FHA loan rules, found in HUD 4155.1, in the section titled “FHA-Insured Mortgages on Principal Residences and Investment Properties” you’ll find the following: “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.” If you want to buy a home, this means the FHA expects you to use it AS a home. Additionally, “FHA will not insure a mortgage if it is determined that the transaction was designed to use | more...

September 26, 2012

FHA Loan Rules: Occupancy Requirements

By Joe Wallace

A reader asks, “I purchased a home in 2006 with an FHA loan. At the time, I remember a stipulation that I was required to reside in the house, for three years (I believe), which I did.” “I have since moved and rented out the property, and just received a letter from my mortgage company that they had received word that my mailing address had changed, and that per the terms of my FHA loan, I was required to occupy the house until the mortgage was paid off, and that I may be facing tax penalties.” “They have asked me to sign a form verifying that I still occupy the house and will do so until the mortgage is paid in full. Are there any types of first time homeowners | more...

September 24, 2012

FHA Condo Project Approval Guidelines Change: Homeowners Association Rules

By Joe Wallace

We’ve reported many new changes to the FHA condo approval process that allows a condominium project to be considered for an FHA loan for individual units. Condo projects must be FHA approved before a borrower can apply for an FHA guaranteed mortgage on a unit in that condo project; that means a project’s compliance with FHA loan rules is very important. For example, a condo project may not be approved for an FHA mortgage loan if there are restrictions on the borrower’s ability to freely sell the property. The FHA has gone back and forth on an issue related to “the right of first refusal” which limits a borrower’s ability to sell. Condo loan applicants have reported problems with the right of first refusal clause, getting turned down for FHA | more...

September 21, 2012

FHA Rules and Transparency In Lending

By Joe Wallace

From time to time, we publish information about the FHA and HUD efforts to combat discrimination in housing. We don’t have new cases to report at this time, but some borrowers often wonder how FHA loan rules are designed to help prevent discrimination in a procedural way. It’s one thing to rely on existing or newly passed federal laws that forbid discriminatory practices in lending, housing, or home sales. It’s quite another to create rules and regulations that specifically work to prevent such illegal practices in the procedures of lending money. In some cases these anti-discrimination rules are more or less labeled and described as such; in others there are layers of subtlety involved, but it’s easy to see how they could be interpreted as an anti-bias requirement. A good | more...

September 20, 2012

FHA Loans After Foreclosure: A Reader Question

By Joe Wallace

A reader asks, “I filed for bankruptcy over 3 years ago. My home was included because I did not sign a reaffirmation agreement. However the bank did not require me to move out because I was not in arrears with the mortgage and never missed a payment.” “About 18 months ago I was forced to move to be closer to my job due to vision problems. My doctor told me to not drive. I had to move out of the blue and the bank foreclosed a year ago. I was told that foreclosures was necessary to get my name off property but I was not legally responsible for the debt due to bankruptcy. Will the foreclosures prevent me from qualifying for an FHA home loan?” This is a complex situation | more...

September 19, 2012

FHA Condo Loan Rules: Pre-Sale Requirements

By Joe Wallace

The FHA recently updated its condo project approval rules to include changes in pre-sale requirements. FHA loan rules permit loans on condo units as long as the condo project is FHA approved. Part of the process of getting condo approval includes meeting FHA guidelines on critical areas such as pre-sale requirements. The new FHA loan rules for pre-sales are now updated. According to FHA Mortgagee Letter 2012-18, “The requirements of Section 3.4 of the Guide are replaced by the following updated policy guidance.” That guidance includes: “At least 30 percent of the total units must be sold prior to endorsement of a mortgage on any unit.

September 19, 2012

FHA Loan Rule Changes For Condominium Project Approval: Investor Ownership Guidelines

By Joe Wallace

The FHA and HUD recently updated condo project approval guidelines in the Mortgagee Letter 2012-18. The mortgagee letter states, “It was determined that certain policy adjustments were needed to address current housing market conditions”. The letter adds, “This ML is effective for all condominium project approvals,recertifications, annexations or reconsiderations submitted for review as of the date of this directive unless otherwise specified in a particular information block. This approval process will apply until August 31, 2014, unless further extended by FHA.” Part of the revised guidelines for condo project approval? Investor ownership rules. Under the section title, “Investor Ownership Section 2.1.4” you’ll find the following: “The requirements of Section 2.1.4, Investor Ownership are replaced by the following updated policy guidance. A unit that is occupied as a principal residence is | more...

September 18, 2012

FHA Issues Revised Condo Project Approval Guidelines For Non-Residential Use

By Joe Wallace

The FHA and HUD have issued revised condo project approval guidelines for a number of areas, including the rules governing non-residential use of condo project floor space. According to Mortgagee Letter 2012-18, “This Mortgagee Letter (ML) puts in place temporary condominium project approval guideline changes to some of the current FHA condominium approval policy provisions.” The letter also says, “These changes replace, for the period specified by this ML, certain approval requirements specifically identified in this ML that were established in ML 11-22 and the attached Condominium Project Approval and Processing Guide (Guide). It was determined that certain policy adjustments were needed to address current housing market conditions.” (Emphasis ours.) A section of the mortgagee letter addresses the FHA rule on non-residential use and/or commercial use of condo space in | more...