www.lasvegasmtg.com Report: What every Realtor should know about the FHA Changes in effect and the legislative changes being requested. Due to losses that occurred from legislative changes in 2003 when both houses of Congress proposed and passed the Down Payment Assistance Program the necessary funding required by law to cover defaults is now below the mandated 2% requirement.
This January 2010, FHA announced the changes that will take effect in staged time frames for the public and industry to digest and hopefully not impact the recovery of the housing markets.
1. FHA is now requiring the "Funding Source" or Lender to show net worth of $1,000,000.00 in assets up from the $250,000.00 previous requirement.
2. Will require the Financial Audits annually of lenders instead of every two years.
3. Lenders performance will be rated and can be followed through Neighborhood Watch.
4. Minimum FICO Score 580 required now with 3.5% down. FICO Scores below will be required to have 10% down.
5. FHA 90 day Flipping Rule is waived for 1 year effective 02/01/2010 till 01/31/2011. Price of home cannot exceed 20% of original purchase price unless it meets strict guidelines. Must be true Arms length transaction with no identity interests between buyer and seller.
6. February 12, 2010 all FHA Case numbers ordered after this date will have to order the appraisals through a HVCC system.
7. April 5th, 2010 the UFMIP will increase from 1.75% to 2.25%. This can still be added into the loan, same as before.
8. Summer of 2010 Sellers Concessions will be reduced from 6% to 3% in a effort to keep properties from being inflated at time of the appraisals to allow the higher concessions.
9. FHA is seeking Legislative policy changes for the following: Higher Annual Premiums for MIP. Tighter enforcements of FHA Lenders.
Summary of the new and proposed changes:
1-3. Will cause greater Underwriting scrutiny on all files and more conditions, longer reviews, more declines if not properly reviewed by the loan officer at time of the application process.
4. Will have very little effect as Lenders investor overlays are far more conservative at 620 then FHA proposed minimum FICO scores set at 580.
5. Will allow more homes to be available for purchase using FHA as a loan option.
6. Will cause some delays initially until the bugs are worked out.
7. Will cause higher costs but will be financed over 30 years, eliminating the initial impact to consumers. Raising costs per month by a few dollars on the average FHA loan of $125,000.00.
8. Will have a greater impact to the consumer as the 3% of sellers concessions will not be enough to cover all of the prepaid and closing costs. Will require more funds from the buyers at closing or higher interest rates so lender can credit closing costs.
9. Will cause a higher payment amount monthly and will reduce the amount of purchasing power for the buyer.
Las Vegas Nevada FHA home loans rates are still very low, but the Fed has announced that it will stop buying mortgage backed securities at the end of March which could cause mortgage rates to rise by .5% to 1% more.