Articles Published in: April 2016

April 21, 2016

Mortgage Loan Interest Rate Trends: Moving Higher

Mortgage loan rates were on the rise on Wednesday. There have been scheduled economic data releases this week as well as a meeting of the European Central Bank (ECB), but market watchers point to bond activity as an important current factor for this week’s move higher. The ECB factor could still make a difference this week so it’s not safe to ignore overseas economic headlines when trying to make a lock or float decision in the short term. 30-year fixed rate conventional mortgages are between 3.625% and 3.75%, best execution. FHA mortgage loan rates are still in 3.25% territory but it’s not certain how long that best-execution rate will persist in an upward rate trend. Much could depend on how sharply rates move from here. As always, best execution rates | more...

April 20, 2016

FHA Loan Income Rules: Disability Benefits As Verifiable Income

By Joe Wallace

FHA loan rules in HUD 4000.1 have requirements the lender must meet for verification of income-a borrower’s income must be considered verifiable in order to be counted in the debt to income ratio. Page 268 of HUD 4000.1 starts off by explaining what the FHA considers disability income: “Disability Benefits refer to benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), or a private disability insurance provider.” The lender is required to gather documentation to prove the borrower is receiving such benefits, the duration of them, and whether or not they are likely to continue to be paid. The continuation of the benefits are an important part of this equation: “The Mortgagee must verify and document the Borrowers receipt of benefits from the SSA, VA, or | more...

April 20, 2016

FHA Loan Questions: Identity of Interest Transactions

By Joe Wallace

For some FHA home loans, a higher down payment may be required when there is an “identity of interest” transaction. FHA loan rules in HUD 4000.1 define this as follows: “An Identity-of-Interest Transaction is a sale between parties with an existing Business Relationship or between Family Members. Business Relationship refers to an association between individuals or companies entered into for commercial purposes.”An identity of interest transaction requires a 15% down payment unless the borrower qualifies for an exception. With this in mind, let’s look at a recent reader question in our comments section. A reader asks, “My wife and I went under contract on a house that is owned by her stepfather. We just found out yesterday about the FHA identity of interest certification. It is his rental property. Is | more...

April 19, 2016

HUD Files Discrimination Charges Against Kansas Landlord

By Joe Wallace

Fair Housing laws don’t just protect home loan applicants. They also protect renters and house/home hunters in the process of trying to find a place to live. You may not think that a housing discrimination case against a renter or potential renter has much to do with FHA loans, but consider the large number of people every year who must relocate due to employment or education needs and it’s clear that even for those who haven’t committed to an FHA mortgage yet, fair housing issues can affect your journey to a new place to live. That’s one reason why we report on cases like the recent HUD charges brought against a Kansas landlord. According to a press release on the FHA/HUD official site, ” U.S. Department of Housing and Urban | more...

April 19, 2016

Mortgage Loan Interest Rate Trends: Holding At Recent Lows

By Joe Wallace

On Monday, mortgage rates closed out the trading day holding at recent lows. There are some important economic data releases coming and there’s a meeting of the European Central Bank scheduled for Thursday–all, some, or none of these may affect rates depending on investor reaction to data and announcements that follow these events. Also, rates can also be influenced by breaking news or unexpected events that cause investors to react in ways that influence mortgage loan interest rates. However, those rates are low at the moment and holding there, but factors like the ones mentioned above could put upward pressure on rates, making the “lock or float” choice more complicated, especially for those with closing dates in the next month or so. At the time of this writing, 30-year fixed | more...

April 18, 2016

On the New FHA Student Loan Policy

By Joe Wallace

We’ve gotten a variety of questions and comments about the FHA’s recent update of policy regarding student loans, deferred obligations, and what calculation the lender is supposed to use when a borrower applies for an FHA mortgage with student loan debt in his or her name. Under the previous FHA loan policy, student loans that were in deferred status were still required to be included in the debt to income ratio by the lender. This was done by taking the balance of the student loan debt and using a percentage of it to calculate an estimated monthly mortgage payment if an actual payment wasn’t available at application time. The updated FHA loan policy for deferred obligations now excludes student loan debt. The rule for deferred obligations–a financial obligation which will | more...

April 15, 2016

FHA Loan Rules In HUD 4000.1: Escrow

By Joe Wallace

FHA loan rules in HUD 4000.1 have several things to say about escrow accounts. FHA loan rules don’t require escrow for every single home loan or refinance loan, but there are cases where escrow is a must and there are also lender standards which may require setting up an escrow account to pay certain expenses associated with the transaction. FHA loan transactions may require escrow for payments to builders in association with construction loans, rehab loans or reverse mortgages. The standards and circumstances vary from loan to loan, so if you aren’t sure whether an escrow account is needed for your FHA loan transaction, discuss your situation with the loan officer. In some cases escrow is used to pay property taxes, in others it may be used to disburse funds | more...

April 15, 2016

Mortgage Rate Trends: Slightly Higher

By Joe Wallace

On Wednesday and Thursday, mortgage loan interest rates have risen slightly. We’ve had a couple of scheduled economic data releases this week, but some market watchers this week gave bond market activity more attention. At the end of the day on Thursday, we see 30 year fixed rate conventional mortgages still being reported at 3.625% best execution in many cases, but our sources indicate that fewer lenders-the most aggressive ones-offered rates closer to 3.5%. So in effect, the slightly higher rates will come in the form of higher closing costs for some, but for others, the best execution rate may be the same as the day before depending on the lender. FHA mortgage loan rates are still holding at a best execution 3.25%. FHA rates tend to vary more among | more...

April 14, 2016

New FHA Loan Policy For Student Loan Debt

By Joe Wallace

Recently we wrote about the new FHA loan guidelines for student loan debt. The FHA and HUD have issued a mortgagee letter updating previous policies. According to FHA Mortgagee Letter 2016-08, the old FHA loan policy for student loan debt “required Mortgagees to calculate a monthly payment for deferred Student Loans using 2 percent of the outstanding balance, and include the payment in the Borrowers Debt-to-Income ratio for qualification purposes. Further, FHA policy currently does not differentiate between non-deferred Student Loans, which are in payment plans that do not fully amortize the loan, and other Installment Loan debt.” But now, FHA loan rules have changed, and while the “effective date” for these new policies isn’t until summer, the FHA states lenders can start using the new guidelines right away. “This | more...

April 14, 2016

FHA Clarifies Deferred Obligation/Student Loan Rules For FHA Loans

By Joe Wallace

The FHA is updating and clarifying the rules for deferred obligations as they pertain to how a lender is to calculate student loan debt. Lenders have, to this point, been required to include the amount of a borrower’s monthly student loan payment–or in the case of deferred payment, a percentage of the total amount. However, the FHA recently issued a mortgagee letter informing lenders of changes to FHA policy. According to HUD Mortgagee Letter 2016-08, the new guidance will affect “all FHA Title II forward mortgage programs with the exception of non-credit qualifying streamline refinances” and “provides documentation requirements and the standard for calculating monthly obligations for all student loans, regardless of payment type or status of payments”. As background, the mortgagee letter states: “With the implementation of Handbook 4000.1, | more...