Articles Tagged With: FHA Requirements

November 29, 2012

FHA Home Loan Foreclosure Avoidance Policy Changes

Recently, the FHA issued a press release announcing changes to its loss mitigation and foreclosure avoidance policies. We’ve reported on some of those changes in previous blog posts; we haven’t yet covered the FHA’s revised loss mitigation options and changes to those policies. According to HUDNo.12-22, in the section titled “Updated Loss Mitigation Priority Order Requirements” you’ll find the following new policy information on how the FHA handles its loss mitigation options–described in order of priority. According to the FHA, “After evaluating a delinquent mortgagor for Informal and Formal Forbearance Plans, FHA’s Loss Mitigation options must be considered in the following order: (1) Special Forbearances; (2) Loan Modifications; and (3) FHA-HAMP.” How does this evaluation process work? The FHA explains, “Before four full monthly installments due on the mortgage have | more...

November 28, 2012

FHA Loans For Older Homes: A Reader Question

By Joe Wallace

A reader asks, “Can a borrower use an FHA loan for homes built in 1957?” We get many similar questions about FHA loan rules–does the FHA have any regulations that specify a home’s age as a factor in FHA loan approval? Not specifically. Instead, the FHA has guidelines that must be followed for the condition of the property–it must meet FHA minimum property standards and be compliant with state and local building code as applicable. There’s no single, centralized standard that can be cited for the age of a property; the FHA requires the home be safe, habitable, and meet other general requirements. One important factor to consider when viewing any property as a potential home is the property’s “remaining economic life”. A lender (or FHA rules) may preclude the | more...

November 23, 2012

FHA Loans and Credit Scores Below 620: A Reader Question

By Joe Wallace

A reader asks, “My husband and I have a credit score of 536. We have 41,000 to put down on a house. Can I get an FHA loan. I applied with a bank but could not.” This reader question doesn’t specifically ask, but it does imply that the reader might be under one of the most common misconceptions about the FHA loan program–that the FHA itself is responsible for making loans, lending money or otherwise distributing funds. The FHA does not loan money or disburse funds. Instead, it guarantees the home loans which are issued by a participating lender. The lender is responsible for processing, approving or denying the FHA loan applications it receives. FHA loan applicants should know that while FHA minimum credit scores at listed at 500 and | more...

November 20, 2012

FHA Issues Mortgagee Letter, Sets Policy For Federal Disaster Areas

By Joe Wallace

Whenever a natural disaster strikes and a federal disaster area is declared in the affected zone, the FHA and HUD have issued guidance about foreclosure moratoriums, assistance for those trying to recover from the disaster and other details. These announcements are usually issued as Mortgagee Letters and come out on an as-needed basis. But now the FHA has codified its position on federally declared disaster areas in general, thanks to the new FHA/HUD Mortgagee Letter, 12-23, “Guidance for FHA-Approved Mortgagees Originating and Servicing Mortgages in Presidentially-Declared Major Disaster Areas”. According to the announcement, “This Mortgagee Letter (“ML”) provides general guidance to FHA-approved mortgagees with loans in any Presidentially-Declared Major Disaster Areas (“Disaster Areas”). Further specific guidance for individual disasters may be communicated as necessary.” This general guidance includes, “A moratorium | more...

November 19, 2012

Minimum Property Requirements: FHA Loan Reader Questions

By Joe Wallace

A reader asks, “I have an appraisal prepared by FHA approved appraiser. This is a short sale and appraiser has made comment that carpet in master bedroom has been removed and has bare concrete floors.” “Yet does not pose a health hazard. She has done the appraisal “As Is” but stated floor covering is required. Question is does FHA accept the floor to be painted with a sealer. Borrower does not want to put carpet in until the property is in their name. Seller will not do anything as it is a short sale. Thanks.” FHA mortgagee letters have in the past indicated that “exposed sub-flooring” or missing carpet can be grounds for issuing a correction. In this question the reader states that the missing carpet does not pose a | more...

November 16, 2012

FHA Loan Refinancing: Subordinate Liens

By Joe Wallace

A reader asks, “My husband and I have a FHA mortgage. We have had the mortgage since 2005. A couple of year ago I lost my job and we got behind.” “FHA gave us a 2nd mortgage with no interest and we only had to pay it off when we paid off the loan. I am not sure if it was called a modification.” “Our rate is 6.50%. We have been only 1 x 30 since then and we are current now. Do you think a streamline would work for us and if so would FHA subordinate the 2nd as it is?” It’s impossible to comment on whether a loan “works” for an individual as so much about home loan refinancing depends on individual circumstances, but the subordinate lien question | more...

November 15, 2012

FHA Refinance Loans: A Reader Question

By Joe Wallace

A reader asks, “I am trying to refinance my house but have had no luck. I have been employed with the same company for several years.” “My credit score is low, During the time period from 2007-2009 I was laid off twice. The only debt we have is our mortgage and what is associated with the house. Can I qualify through FHA for a refinance?” The reader’s question includes a mention of low credit scores. Low credit scores can definitely affect a borrower’s ability to borrow, depending on circumstances, the actual FICO score number and other factors. While some refinance loans are intended to assist a borrower and help reduce monthly payments, interest rates, or both, the credit score issue can be a factor. But it’s not safe to assume | more...

November 14, 2012

FHA Appraisals: Are They As Strict As Conventional Loan Appraisals? A Reader Question

By Joe Wallace

A reader asks, “Are FHA appraisals generally more “strict” than traditional mortgage appraisals? I am questioning what types of repairs are generally required in advance of closing?” “Specifically, I am selling my owner-occupied home to buyers that are anticipating an FHA loan, but they have expressed concern about the appraisal process.” “There are cosmetic concerns at the house (rooms need paint, screen door should be replaced, missing shutter), but the well, septic, roof and furnace are all relatively new. Can you please clarify?” This question is difficult to answer for one simple reason–FHA appraisals require the home to live up to both FHA minimum property standards (MPRs) AND state/local building code. If FHA minimum standards are met, but local code compliance is not evident, FHA MPRs do NOT trump the | more...

November 13, 2012

FHA Loan Credit Scores: A Reader Question

By Joe Wallace

A reader asks, “I want to buy a home. I am renting a house that cost me $ 1300.00 plus lights and water bill. I filed bankruptcy almost 3 years ago and my credit score is bad. I am working at the same place for almost 7 years for about 42,000.00 yearly. Could I get a FHA loan to buy a house?” FHA loan rules, as described in HUD 4155.1 Chapter Four, explains what (from a lender’s point of view) is required when applying for an FHA home loan. Under the section of Chapter Four titled, “Hierarchy of Credit Review” we learn that FHA requires the lender to take several issues into account when evaluating credit: “Evaluating credit involves reviewing payment histories in the following order: first: previous housing expenses, | more...

November 7, 2012

FHA Loan Rules For Flood and Hazard Insurance

By Joe Wallace

In the wake of Hurricane Sandy, it seems like a good time to review a recent FHA Mortgagee Letter which addresses issues regarding hazard and flood insurance payments. While not all FHA borrowers may be affected by either storm damage or the rules in this FHA mortgagee letter, those that are affected should know the latest FHA guidance. FHA mortgagee letter 2012-19, titled “Hazard and Flood Insurance Requirement Reminder” reminds lenders about the Department of Housing and Urban Development’s “existing servicing procedures as they pertain to releasing hazard insurance proceeds for damaged properties securing Federal Housing Administration (FHA) insured mortgage loans.” According to the letter, the FHA “standard mortgage document” requires that the mortgagee–the lender–is named as a “Loss Payee” on the hazard insurance policy issued in connection with an | more...