www.lasvegasmtg.com Report: HUD want to hear from you on proposed changes!
www.lasvegasmtg.com Report: HUD want to hear from you on proposed changes to help shore up FHA balance sheet. While everyone is familiar with the recent changes in Upfront Mortgage Insurance from 1.75% to 2.25% we will see the next wave of changes outlined here.
Las Vegas, Nevada home loans for purchases and refinances in the last two years are underwritten with FHA loans nearly 67% of the time for loans under $400,000.00. With the proposed changes that FHA is seeking, this could have a negative impact in Las Vegas housing industry and cause a longer time for the housing recovery.
FHA Proposed Rule Changes:
Restricting sellers concessionsfrom the current allowable 6% to 3 %. Las Vegas has already been limited by the banks on sellers concessions to 3% every since inventory has been held artificially low so the impact on the future contracts will be minimal.
2. The down paymentwill increase from 3.5% of the contract price for borrower's with a minimum FICO Scores over 580 and less then 620 will now be required to have 10% down . This would not cause much of a problem as most lenders have existing overlays with a minimum of 620 FICO scores.
3. Increase the minimum FICO Score from no minimum to 580 to offset the risk of bad loans. Most lenders in Las Vegas have already set overlay at a 620 minimum FICO Score and a maximum DTI ratio 45%. Yesterday one of the major lenders in Las Vegas just increased the minimum FICO Score to 630 and DTI is capped at 40%.
HUD will be seeking the approval from Congress to also give it the authority to raise the annual premium from .55% to the maximum of 1.25%. This will be necessary to bring the minimum reserves up to the 2% FHA is required by law to have in case of foreclosure.
FHA is under fire from Congress because the required minimum reserves of 2% set by Congress has been slowly deteriorating to less the .5% due the high number of foreclosure from the DPA (Down Payment Assistance) which ironically was created by Congress in 2005 to compete with conventional subprime loans as leveling the playing field for FHA!
With FHA overwhelming importance to provide home buyer's low cost home loans it makes even more sense we need to make changes to ensure it's survives this storm!