Articles Published in: November 2014

November 28, 2014

Fair Housing Act Violations: A Case in Puerto Rico

A press release on the FHA/HUD official site reveals that a Puerto Rico condo association discriminated against a person with disabilities in violation of federal fair housing laws. According to HUDNo.14-142, “The U.S. Department of Housing and Urban Development (HUD) announced today it has ordered Castillo Condominium Association, in San Juan, Puerto Rico, to pay $20,000 in damages plus a $16,000 civil penalty after finding that the association violated the Fair Housing Act when it refused to allow a resident with disabilities to keep his emotional support animal.” Support animals and/or service animals have a different status than what might be considered an “ordinary pet”. According to the FHA/HUD official site, “The Fair Housing Act makes it unlawful to refuse to make reasonable accommodations in policies or practices when such | more...

November 27, 2014

Happy Thanksgiving!

By Joe Wallace

Happy Thanksgiving 2014! We pause today from our usual routine of answering reader questions and giving advice about FHA home loans to celebrate the holiday. Have a happy and safe Turkey Day! Our regularly scheduled posts return tomorrow.

November 26, 2014

FHA Mortgage Loan Interest Rate Trends

By Joe Wallace

FHA home loan interest rate trends this week include a fairly steady drop in mortgage rates, pushing conventional loans into sub-four percent territory in some cases and FHA mortgage rates down into a previously held comfort zone. Last week, 30-year fixed rate conventional mortgage loan rates were at a best execution average of 4.0 or higher, but the downward movement this week sent those best execution numbers to an at-or-sub-four percent range. There’s greater variation among conventional lenders this week and not all the improvements are offered by all financial institutions. What’s more, when it comes to FHA mortgage loan rates, at times we don’t see those rates changing as quickly as their conventional counterparts. But this week, FHA rates managed to react in the borrower’s favor. We are now | more...

November 26, 2014

Holiday Spending and FHA Loans: What To Consider

By Joe Wallace

This week, shoppers brace themselves–and their credit cards–for Black Friday and the official start of the holiday shopping season. If you are in the planning stages for an FHA home loan or a refinance loan, there may be some considerations to make when it comes to your holiday spending. At least where your credit cards are concerned. The holiday shopping season is probably the time of year when it’s most tempting to apply for a new credit card account or even multiple accounts. But opening new lines of credit when you’re just about to apply for a new home loan or refinance loan is a bad idea. Your debt-to-income ratio can suffer when new lines of credit are opened, and a lender may need to consider both the used and | more...

November 25, 2014

“Mandatory Obligations” For FHA HECM Loans

By Joe Wallace

The FHA made a great many changes to the Home Equity Conversion Mortgage loan (HECM) program in 2014. There have been alterations to the way funds are paid, the rules covering fixed-rate HECMs versus adjustable rate HECM loans and much more. One thing the FHA has also done is to make a list of what it calls “Mandatory Obligations” for HECM loans–basically a list of required fees and expenses that could affect the amount of money that comes to a HECM borrower from the initial disbursement. This list is rather lengthy, but knowing these expenses is very important–borrowers should know that the items on this list are required to be factored in when the lender is trying to determine how much money comes to the borrower on that initial payout | more...

November 24, 2014

FHA Condo Approval Rules: A Reader Question

By Joe Wallace

A reader got in touch recently with a lengthy question, asking: “Our HOA board is considering revising our declaration dated 4/06/84. Our building was built in 1960 as an 11 story apartment building and transformed into a condo building in 1984. There are 50 units in the building– approximately 27 percent are rental properties. Our building has FHA certification. As units are sold, investors buy them as rental units.” “We would like to reverse this trend by revising our declaration to state that as units are sold, they are sold as owner occupied units. The revised declaration would provide that owners could obtain a temporary rental permit from the HOA board enabling the owner to rent two years within a five year period. Also new owners must occupy their unit | more...

November 21, 2014

FHA Loan Reader Questions: Non-Functioning Wells

By Joe Wallace

A reader asks, “I bought a home with FHA loan and a well system and septic. Later found the well was a spring box system and not on the property we were forced to buy the property seperate from the house .” “The well has never worked and runs out all the time , i was told that FHA wouyld be inspecting the well system prior to closing , but now we have asked for the inspection and it was never done on the well or the septic systm . Any ideas on where to get help?” It may simply be a case of the way this reader question was worded, but it’s worth pointing out that the FHA itself does not perform well inspections, or similar services. An FHA | more...

November 20, 2014

FHA Mortgage Rate Trends

By Joe Wallace

Since our last report on FHA mortgage rate trends, we’ve seen a general downward trend in mortgage interest rates, but with the range we’ve been reporting (best execution) remaining. Borrowers have in some cases seen the gains reflected in lower closing costs rather than the actual interest rate changing itself, while other borrowers may indeed have experienced an adjusted interest rate based on improvements than sent best execution rates back into month-long lows. 30-year fixed rate conventional mortgages have, best execution-wise, remained in their range between 4.0 and 4.125%, though some very well qualified borrowers may have gotten access to sub-four percent rates depending on the lender and the timing of the rate lock. But that doesn’t mean that all borrowers had that option–the rates we report on here are | more...

November 20, 2014

FHA HECM Loan Rule Changes: Credit Standing and Financial Assessment

By Joe Wallace

In 2014, the FHA changed many of the rules associated with Home Equity Conversion Mortgages or HECM loans. One of those rule changes involves a new requirement that lenders perform a financial assessment of potential HECM borrowers to insure the applicants are not only qualified for the program on a financial basis, but also to insure they are able and willing to abide by HECM loan requirements. According to the FHA Mortgagee Letter, “Revised Changes To The Home Equity Conversion Mortgages Requirement”, there were major reasons for the policy changes. “An increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish in Mortgagee Letter 2013-27 a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.” As a | more...

November 19, 2014

FHA HECM Loan Changes: Disbursements

By Joe Wallace

Recently we wrote about FHA Home Equity Conversion Mortgage (HECM) loan rule changes that were announced in FHA Mortgagee Letter 2014-21. Those rule changes include alterations and clarification of policy related to a variety of HECM loan policies. One very important affected area of HECM loan regulation the borrower should know about is related to disbursement of HECM loan funds. Mortgagee Letter 2014-21 announces separate policy for fixed-rate HECM loans and for Adjustable Rate HECM loans. Here is the FHA policy for disbursement limits according to ML 2014-21: “Definitions only for Adjustable Interest Rate HECMs  Initial Disbursement Limit: The maximum disbursement to the mortgagor allowed at loan closing and during the First 12-Month Disbursement Period is the greater of 60% of the Principal Limit; or the sum of Mandatory | more...