Articles Published in: April 2013

April 17, 2013

FHA Refinance Loans, Disaster Assistance, and Loan Forbearance

The FHA has updated its disaster relief policies to help those recovering from the effects of Hurricane Sandy, but also natural disasters in a federally declared disaster area in general. One area that hasn’t gotten much attention until now is the FHA policy on refinance loans in such cases. What assistance is there for someone with an FHA insured refinance loan who is struggling in a federal disaster area? According to the new FHA mortgagee letter, 13-11, “In accordance with HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance One- to Four-Unit Mortgage Loans, for the purpose of determining the acceptability of the borrower’s payment history for any FHA refinance, when a borrower has withheld mortgage payments pursuant to either a Formal or Informal Forbearance drafted under this Mortgagee Letter, | more...

April 17, 2013

FHA Amends Guidance For Hurricane Sandy Disaster Assistance

By Joe Wallace

The FHA has issued a new mortgagee letter amending its guidance and policies for Hurricane Sandy disaster relief as well as general guidelines for disaster assistance related to FHA home loans, loan forbearance and related measures. Mortgagee Letter 13-11 states, “As indicated in Mortgagee Letter 2012-23, HUD requires a moratorium on foreclosures of properties in Presidentially-Declared Major Disaster Areas (PDMDAs) for a ninety (90) day period beginning on the date of each Disaster Area Declaration. The moratorium applies to the initiation of foreclosures AND foreclosures already in process. As necessary, HUD may communicate further specific guidance for extension of moratorium periods for individual disasters.” Additionally, “During foreclosure moratorium periods, HUD expects servicers to make every effort to communicate with and assist affected borrowers in rebuilding or repairing damaged properties, minimizing | more...

April 16, 2013

Coldwell Banker Settles In HUD Housing Discrimination Claim

By Joe Wallace

A press release on the FHA/HUD official site announced the recent settlement of a housing discrimination claim involving Coldwell Banker. According to HUDNo.13-051B, ” The U.S. Department of Housing and Urban Development (HUD) announced today a $90,000 Conciliation Agreement with Coldwell Banker Residential Brokerage and the seller of a home in Worcester, Massachusetts, settling allegations they violated the Fair Housing Act by preventing the sale of a house to be used as a group home for persons with disabilities.” Fair Housing Act laws forbid discrimination in both rental procedures and property sales–including discriminatory standards or requirements based on disability. In this particular case, the requirements included a housing covenant that prevented the property from being used as a group home for disabled persons. “HUD is committed to promoting housing opportunities | more...

April 15, 2013

FHA Loan Answers: FHA Loan Applications, Separation, and Divorce

By Joe Wallace

A reader asks, “I’m married, the current home is FHA loan under my husbands name only….can i buy a home for 120,000 under FHA to live in? If so, will they count my husbands debts against me getting the loan? We have agreed to live separate, stay married though, do they require legal separation?” This question doesn’t have a one-size-fits-all answer for one very important reason. FHA loan rules go hand-in-hand with state community property laws. What does this mean? If a borrower is divorced, separated, or still legally married in a community property state, each spouse may be liable for all debts incurred during the marriage. In such cases, the FHA lender may be required to include both spouses on the FHA mortgage, run credit checks, etc. on both | more...

April 12, 2013

FHA Loans, Credit, and the Future Of Mortgage Lending

By Joe Wallace

A recent article in American Banker notes that while the housing market is definitely trying to recover, many borrowers face a difficult time getting a mortgage because of high credit standards. But the FHA and the Department of Housing and Urban Development are trying to work out solutions to this problem, one that according to the American Banker article by Kate Berry titled, FHA Working On Plan to Increase Lending, Reduce Banks’ Risk, would, “potentially release banks and mortgage lenders from liability for minor defects on FHA loans that meet current guidelines even if they ultimately default”. One of the problems–one addressed publicly by both the HUD Secretary and the head of the FHA–is the need for financial institutions to expand access to home loans for borrowers with credit scores | more...

April 11, 2013

FHA Loan Requirements For Employment Verification

By Joe Wallace

When you apply for an FHA mortgage, you’re asked to fill out a variety of forms and authorizations giving the lender permission to verify your income, credit history and your employment record. But what is a lender looking for when it’s time to verify your employment? FHA loan rules instruct the lender to carry out a minimum employment review in addition to whatever policies are used by the financial institution. The FHA rules don’t override the bank’s standards, but they do establish a baseline for what must be done at a minimum. According to HUD 4155.1 Chapter One Section B, “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: • | more...

April 10, 2013

FHA Loan Answers: Is a Credit Check Required For FHA Loan Assumptions?

By Joe Wallace

FHA loans are assumable, which means that if you buy a home with an FHA mortgage and decide to do so later down the line, you could allow someone else to assume the loan–taking over responsibility for the mortgage rather than selling the home outright. A loan assumption means that the same mortgage you applied for is transferred to a new owner rather than going through a sale of the home, payoff of the original mortgage, and issuing a new loan to the new owner. Most homes today (except for mortgages closed before December 15 1989) purchased with an FHA home loan require a credit check for the person assuming the loan. There’s no such thing as a simple “hand-to-hand” transfer of an FHA mortgage from one person to another. | more...

April 9, 2013

FHA Loan Reader Questions: Foreclosure Waiting Period

By Joe Wallace

A reader asks, “I’m in the process of obtaining a FHA Loan. I completed my Chapter 13 bankruptcy a year ago after completing five years of payments on time. My credit score is not an issue right now. All of my paperwork is in, or so I thought. My mortgage lender now tells me that I need a letter from the bankruptcy court saying that I’m allowed to get a loan.” “She says that this is a requirement of the underwriters. I think that the underwriter should only be asking for this if I was still in the bankruptcy, not now, when I’ve been cleared by the courts. What can I do?” The answers are not simple in a situation like this, and there are many details we aren’t privy | more...

April 8, 2013

FHA Loan Answers: Applying For A Loan After A Short Sale

By Joe Wallace

Home owners who need to ask about FHA loans after a short sale send us a good many of our most frequently asked questions. What do FHA loan rules say about borrowers trying to apply for a new FHA mortgage after a short sale transaction? According to HUD 4155.1 Chapter Four, “A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to • take advantage of declining market conditions, and • purchase a similar or superior property within a reasonable commuting distance at a reduced price as compared to current market value.” But that does NOT mean borrowers cannot apply for an FHA loan after a short sale–if you do not fit into the description above, and were | more...

April 5, 2013

Can A Family Have More Than One FHA Loan?

By Joe Wallace

A reader asks, “Is it true that married couple can only have one FHA loan?” The answer to this question depends on several different factors. What do the FHA loan rules say about having more than one FHA mortgage? If the married couple are obligated together on an FHA loan, there is generally no way to apply for a new FHA loan because of the residency requirement for the home purchased with an FHA mortgage. The rules in this area can be found in HUD 4155.1 Chapter Four, which says “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 | more...