Articles Tagged With: Mortgage Underwriting

October 30, 2012

FHA Warning On Scams Related to the National Mortgage Settlement

In early 2012, a landmark mortgage settlement between five major lenders and the U.S. government was reached after complaints were filed regarding home loan abuses and foreclosure abuses. According to a Department of Justice press release dated March 12, 2012, “The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation

October 24, 2012

FHA Loan Eligibility

By Joe Wallace

When a borrower applies for an FHA guaranteed mortgage, the lender is required to determine whether the borrower is a good risk by examining credit rating, the applicant’s debt-to-income ratio, and employment. But the lender also has some other checking to do. FHA loan rules state, “To determine whether a borrower is eligible to participate in an FHA mortgage loan transaction or must be rejected, the lender must: examine HUD’s LDP list, the GSA List and CAIVRS, and document the reviews on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary.” What do all those abbreviations mean? “LDP” stands for “Limited Denial of Participation”. GSA is short for “U.S. General Services Administration List of Parties Excluded from Federal Procurement or Non-procurement Programs”. The acronym “CAVIRS” refers to “HUD’s Credit Alert Interactive | more...

October 23, 2012

FHA Loans and Escrow Accounts: What You Should Know

By Joe Wallace

Many home loan applicants find themselves opening escrow accounts at the request of their lender for such things as property taxes and other expenses related to owning a home purchased with an FHA mortgage. While the FHA loan program does not require an escrow account, the lender may. The FHA official site reminds borrowers and lenders alike that it’s misleading for any lender to imply that FHA loan rules issued by the Federal Housing Administration require escrow; this is not true but the lender is free to do so. The FHA official site says of escrow, “Section 10 of the Real Estate Settlement Procedures Act (RESPA) limits the amount of money a lender may require the borrower to hold in an escrow account for payment of taxes, insurance, etc. RESPA | more...

October 16, 2012

Exceptions to the FHA Mortgage Insurance Payment Eligibility Date Rule: A Reader Question

By Joe Wallace

On March 6, 2012, the FHA and HUD issued Mortgagee Letter 2012-4, which included the following description of a decrease to the annual Mortgage Insurance Premium for “certain Streamline Refinance transactions”: “For all SF Forward Streamline Refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the Annual MIP will be 55 bps, regardless of the base loan amount. The endorsement date is on the Case Query screen in FHA Connection. This change is effective for case numbers assigned on or after June 11, 2012.” Additionally, the same document describes further changes to the up front mortgage insurance payments for these same loans: “For all SF Forward Streamline Refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009, the | more...

October 12, 2012

Can I Use A Power of Attorney To Apply For An FHA Home Loan?

By Joe Wallace

A not-so-commonly asked question, but a very important one about FHA loan rules, involves the use of a power of attorney to apply for or commit to an FHA mortgage loan. FHA loan rules state, “All borrowers applying for the mortgage and assuming responsibility for the debt must sign Fannie Mae Form 1003, Uniform Residential Loan Application (URLA), and all addenda.” “Either the initial loan application or the final, if one is used, must contain the signatures of all borrowers. The initial loan application may not be executed by power of attorney except for military personnel and incapacitated borrowers…” What does this mean? In short, there are only two types of FHA borrowers permitted to have a loan executed on their behalf by a power of attorney; the FHA official | more...

October 11, 2012

FHA Loan Reader Question: Title I Loans For Remodeling/Rehab

By Joe Wallace

A reader asks, “I am interested in borrowing a small amt. of money for remodeling my home. Is there any way I can qualify for an FHA loan for this purpose? I have never had bankruptcy, never missed a payment, never defaulted on any loan…” Something called a Title I Home Improvement loans are described on HUD.gov as a way to do just what this reader question describes. According to the official site on the page titled “About Title I Home Improvement Loans” you’ll find the following description: “HUD insures private lenders against loss on property improvement loans they make. The applicant must have a good credit history and the ability to repay the loan in regular monthly payments. Both large and small improvements can be financed. Search HUD’s list | more...

October 9, 2012

FHA Loans and Credit Score Requirements

By Joe Wallace

Recently we posted a reader question about FICO scores and FHA loan approval. The reader wanted to know why a credit score range between 540 and 618 didn’t qualify for an FHA mortgage. The reader question included the following: “My scores are 618 – 595 – 540…why couldn’t I qualify for this loan?” There are two factors at work when viewing FICO scores. The lender is required to observe FHA loan minimums–which this reader was technically able to meet. But the lender is also required to observe the FICO minimums established by the financial institution. If the FICO score doesn’t meet the bank’s minimum, it’s not eligible for FHA loan approval. How does the lender interpret the three credit scores to determine eligibility if a borrower is right on the | more...

October 9, 2012

FHA Loan Reader Question: Why Couldn’t I Qualify For an FHA Loan?

By Joe Wallace

A reader asks, “I have really been working on my credit to be able to purchase a home. My scores are 618 – 595 – 540. I paid my student loan off in full. I went and got a unsecured credit card to help boost my scores…when people check your credit the numbers roll back…I have an auto loan for just over a year that is in good standing.” “I also paid off 2 vehicles and have been at my job now for just over 16yrs….Why, Why, Why couldn’t I qualify for this loan?” There are a number of reasons why a borrower might not be approved for an FHA mortgage, but in this reader’s case the FICO score could be one of those reasons. Why? According to FHA loan | more...

October 8, 2012

HUD Reaches Settlement in Pennsylvania Discrimination Case

By Joe Wallace

On the FHA/HUD official site you’ll find a press release announcing a settlement in a discrimination case against a Pennsylvania company that allegedly discriminated against families because of their national origin. According to HUDNo.12-160, “The U.S. Department of Housing and Urban Development (HUD) announced today that it has reached a Conciliation Agreement with the Lancaster, PA-based Ecklin Group that will end an alleged policy of refusing to rent to Burmese refugee families.” The press release adds, “The agreement is the result of a complaint HUD initiated against the Group after company staff allegedly failed to renew the leases of three Burmese families because of their national origin, and made statements to various people that the group would no longer accept rental referrals for refugees that were referred by Lutheran Refugee | more...

October 5, 2012

FHA Loan Reader Questions: Modular Homes

By Joe Wallace

Paragraph A reader asks, “Can a modular home on a full foundation be considered for an FHA loan?” A reader asks, “Can a modular home on a full foundation be considered for an FHA loan?” In general the FHA offers two types of home loans for manufactured housing. Here’s a quote from a frequently asked questions list on the FHA official site at FHA.gov: “How about manufactured housing and mobile homes? Yes, FHA has financing for mobile homes and factory-built housing. We have two loan products – one for those who own the land that the home is on and another for mobile homes that are – or will be – located in mobile home parks.” FHA loan rules do have provisions for modular homes (which are also considered factory-built houses); | more...