www.lasvegasmtg.com Report: FHA the Truth or Fiction Game is based on Mortgagee Letters everyone has heard about, but until you try to implement them you do not know if they are true or fiction in the real world of lending. So lets begin with an easy one alright?
1) FHA now has implemented a minimum FICO Score set at 580. If you do not have a minimum FICO score of 580 you will need 10% down? Is this Fact or Fiction? This is Fact based on FHA guidelines, but Fiction in the real world of lending! Lenders have what is called Matrix's or Overlays set by the investors that buy the loans on the secondary market. Few lenders will do 580 while most are set at 620 minimum FICO score and no hits to the rate with FICO scores over 640. Mortgagee Letter 10-016.
2) FHA has waived the 90 day flipping rule. Is this Fact or Fiction? Fact FHA has waived the 90 day flipping rule starting January 15th, 2010. Fiction in the real world of lending. All lenders will not accept this waiver and will still require 91 days from the last record of sale date. As of today I have only two lenders now with a lot of restrictions. The sales price cannot be more then 20% above the previous sale and requires two appraisals. The second appraisal cannot be paid by the seller. Again the investors are fearful of fraud on these and it is not worth the risk to try to sell on the secondary market. Mortgagee Letter 10-011
3) FHA allows a borrower to use a FHA loan when they just completed a short sale on their primary home that was less then 3 years? Fact or Fiction? Fact the FHA did make this change with the Mortgagee Letter 09-52 dated December 16th, 2009 allowing the borrower use a FHA loan when just completing a short sale. Fiction in the real lending world only one lender will accept this Mortgagee Letter 09-52 based on the following criteria:
a) The short sale was due to other circumstances other then declining markets.
b) The borrowers were current on the mortgage and other installment debt on the previous owned property.
c) The proceeds of the short sale served as payment in full.
Based on the following Criteria this would be Fiction for most borrowers and they would not be able to qualify.
We are now halve way through March and HUD has released Mortgagee letter 10-051 on March 16th, 2010. With program changes, new guidelines changes, then lenders interpretation of the changes, and the placements of their overlays due to the FHA changes, it is enough to make your head spin!