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Articles Published in: 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...

 

Happy Veterans Day!

Today we pause from our usual discussions of FHA loans and answering reader questions to observe Veterans Day. Everyone reading this blog probably knows someone in uniform, or is a veteran or currently serving themselves, and we say THANK YOU to our men and women in uniform. You deserve far more than one special day a year for all your sacrifices and dedication. To those who know veterans, today is a great day to thank them for what they do or have done. We owe them all a great deal. Happy Veterans Day! Our regularly scheduled posts will resume tomorrow.

 

FHA HECM Loans

  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...

 

FHA Loan Reader Questions: Buying a Home After Chapter 7

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...

 

FHA Clarifies Foreclosure Rules

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...

 

HUD Settles Bank Of America Maternity Leave Discrimination Case

The U.S. Department of Housing and Urban Development issued a recent press statement announcing, “Bank of America will pay $45,000 as part of Conciliation Agreements resolving allegations the lender discriminated against pregnant women seeking mortgage loans.  HUD had alleged that the Bank of America refused to refinance the mortgages of two couples in California and Texas, because the women were on maternity leave.” We write a great deal of articles here about home loans, and one of the most important aspects of being an informed borrower is knowing your rights under the Fair Housing Act. As the FHA/HUD press release points out, refusing a mortgage or denying a borrower mortgage insurance because the applicant is pregnant or on family leave is a violation of the Fair Housing Act. “No lender | more...

 

FHA Loan Foreclosures: How Long Must a Borrower Wait To Apply Again?

We’ve received a lot of reader questions in recent days about FHA loan eligibility issues, including queries on how long the borrower must wait after foreclosure on a previous FHA home loan before applying for a new FHA mortgage. FHA loan rules address this issue in HUD 4155.1 Chapter Four, Section A. In the section titled, “Eligibility for FHA-Insured Financing”, we find the following guidance to the lender under the subheading, “Waiting Period for Borrowers With Past Delinquencies, Defaults or Claims on FHA Loans”. It says: “If the borrower has had past delinquencies or has defaulted on an FHA- insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage.” This waiting period is mandatory, though borrowers should ask their loan officer or contact | more...

 

FHA Loan Income Requirements: A Reader Question

A reader asks, “I have a question about the FHA 3.5 percent down program. I know my scores are all in the high six’s lowest 637 highest 677 , I was told that I qualify for the loan but when push came to shove, I was told I needed my net income to be almost 4 times what i make now. What is or are the financial requirements to qualify for the program? Also, I am self employed and have been for over 5 years. I presume the rules vary from lender to lender, state to state, etc…I need to know if this lender purposely made up this story just to ‘show me the door’ so to speak.” We can’t speak for a lender’s intentions, so we’ll skip the last | more...

 

FHA Refinancing Loan Basics

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...

 

FHA and HUD Update Loss Mitigation Instructions for Lenders

Borrowers who get into financial trouble may have difficulty paying their monthly FHA mortgages. In all cases, the FHA encourages borrowers to get in touch with the lender as soon as possible to make arrangements to avoid going into delinquency and default on an FHA loan. Borrowers who do this have the most options, and find many more doors open to them. Borrowers who wait until it’s too late to prevent going into default may have few choices. What is the lender’s responsibility when a borrower starts missing payments and is in danger of foreclosure? The FHA and HUD have issued updated guidance telling lenders what must be done and what the acceptable course of action is for the financial institution in such cases. These updates were published in FHA | more...