HUD extends Waiver for “Anti-Flipping” Rule through 2012

December 28, 2011 by Leave a Comment

Mortgageporterhouse

UPDATE: HUD HAS ANNOUNCED THIS WAIVER WILL BE EXTENDED THROUGH DECEMBER 2014.

HUD recently announced they will extend their anti-flipping waiver through December 2012.  From HUD:

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity…[HUD] will extend FHA’s temporary waiver of the anti-flipping regulations. 

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days… The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA.  All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  The Waiver continues to be limited to sales meeting the following conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. 
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.
  • The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. [Reverse Mortgages]

In addition to what HUD covered in their email on Friday, the waiver also specifies that:

  • the sale must be by the owner of record
  • the property may not have been a repeatedly “flipped” over the past year
  • the property was marketed openly and fairly

When a home is being resold 20% or higher than what the seller purchased the property for in less than 90 days, often times a second appraisal will be required and the seller will need to show documentation to support the increased value in the home, such as receipts for the improvements made. A property inspection report will also be required by the lender to assure the quality of the improvements made to the property. Any health or safety issues disclosed by the property inspection will need to be corrected.

If a home has been re-sold withing 91-180 days at more at 100% or more than the seller’s acquisition cost, the same conditions will apply. If a second appraisal is required, the home buyer is not allowed to pay for it per HUD. Thanks to LO Comp, which the Fed passed in April, your friendly mortgage originator cannot use their commission to pay for this cost either.

Investors who are reselling in a short period of time for a much higher amount than their acquisition cost should be prepared for the cost of the second appraisal when the buyer is using FHA for financing. Folks should also retain detailed records of improvements (including all receipts) when they’re planning to quickly resale a home. The seller’s acquisition cost is the sales price of the home, plus the seller’s closing cost, including real estate commissions. It does not include any repairs.  

If you are considering buying a home located anywhere in Washington State, I’m happy to help you! Click here for a mortgage rate quote for homes located anywhere in Washington.  I’ve been originating home loans at Mortgage Master Service Corporation since April 2000, including FHA insured loans.

Filed Under: Appraisals, FHA Tagged With: , ,

FHA Loan Limits for homes located in Washington State for November 18, 2011 and 2012

December 5, 2011 by Leave a Comment

A few days ago, HUD confirmed the 2012 FHA Mortgage limits which have been restored to the higher “temporary” higher loan limits effective November 18, 2011. This morning, HUD’s site is reflecting the revised loan amounts.   

Here are the 2012 FHA loan limits which are retroactive for case numbers obtained November 18, 2011 or later for homes located in Washington:

King County, Snohomish County and Pierce County

  • 1 Unit: $567,500
  • 2 Unit: $726,500
  • 3 Unit: $878,150
  • 4 Unit: $1,091,351

Benton and Franklin Counties:

  • 1 Unit: $275,000
  • 2 Unit: $352,050
  • 3 Unit: $525,550
  • 4 Unit: $528,850

Chelan and Douglas Counties:

  • 1 Unit: $342,700
  • 2 Unit: $438,700
  • 3 Unit: $530,300
  • 4 Unit: $659,050

Clallam County:

  • 1 Unit: $384,100
  • 2 Unit: $491,700
  • 3 Unit: $594,350
  • 4 Unit: $738,650

Clark and Skamania Counties:

  • 1 Unit: $418,750
  • 2 Unit: $536,050
  • 3 Unit: $648,000
  • 4 Unit: $805,300

Island County:

  • 1 Unit: $381,250
  • 2 Unit: $488,050
  • 3 Unit: $589,950
  • 4 Unit: $733,150

Jefferson County:

  • 1 Unit: $437,500
  • 2 Unit: $560,050
  • 3 Unit: $677,000
  • 4 Unit: $841,350

Kitsap County:

  • 1 Unit: $475,000
  • 2 Unit: $608,100
  • 3 Unit: $735,050
  • 4 Unit: $913,450

Kittitas County:

  • 1 Unit: $328,750
  • 2 Unit: $420,850
  • 3 Unit: $508,700
  • 4 Unit: $632,200

Mason County:

  • 1 Unit: $310,000
  • 2 Unit: $396,850
  • 3 Unit: $497,700
  • 4 Unit: $596,150

San Juan County:

  • 1 Unit: $593,750
  • 2 Unit: $760,100
  • 3 Unit: $918,800
  • 4 Unit: $1,141,850

Skagit County:

  • 1 Unit: $373,750
  • 2 Unit: $478,450
  • 3 Unit: $578,350
  • 4 Unit: $718,750

Thurston County:

  • 1 Unit: $361,250
  • 2 Unit: $462,450
  • 3 Unit: $559,000
  • 4 Unit: $694,700

Whatcom County:

  • 1 Unit: $375,000
  • 2 Unit: $480,050
  • 3 Unit: $580,300
  • 4 Unit: $721,150

Adams, Asotin, Cowlitz, Ferry, Garfield, Grant, Grays Harbor, Lewis, Lincoln, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Whakiakum, Walla Walla, Whitman and Yakima Counties:

  • 1 Unit: $271,051
  • 2 Unit: $347,009
  • 3 Unit: $419,425
  • 4 Unit: $521,250

Related post:

2012 Conforming Loan Limits

Filed Under: FHA, First Time Home Buyer Tagged With: ,

HUD confirms Higher FHA Loan Limits with an official Mortgagee Letter

December 2, 2011 by 4 Comments

I just received notice from HUD announcing higher FHA loan limits are to be retroactive for case numbers issued November 18, 2011 and later via Mortgagee Letter 2011-39.  This means that in the greater Seattle area, FHA loan limits will be restored to $567,500 instead of $506,000.  With that said, when I pop over to HUD's loan limit site, it's still reflecting $506,000 for King County (as of the time of publishing this post).

I did tweet to HUD earlier today asking them when the loan limits will be updated.

HUDtwitter

Perhaps everything will be updated in the morning and I shouldn't be blogging at 10:39 in the evening… when I receive an email like this from HUD at 9:55pm, I consider it "breaking news".

I'll have more information soon.  

Filed Under: FHA

More Changes Coming for FHA Loans

December 1, 2011 by Leave a Comment

Today, HUD Secretary Shaun Donovan testied before the House Committee on Financial Services addressing the financial health of the FHA mortgage insurance fund.  You can read his prepared testimony here.

Donovan has pledged to reduce the allowed seller contribution (currently at 6%) and to bring it down to "more of the norm".  Currently, with a conventional mortgage, if you have less than 10% down payment, the maximum seller contribution that is allowed is 3%.

Mr. Donavan also addressed increasing the annual mortgage insurance rate (paid monthly).  The National Mortgage News reports that he's considering raising the annual mortgage insurance rates on FHA High Balance loans.  In the greater Seattle area, this would be loan amounts from $417,001 to $567,500 in 2012.  

In my opinion, it would be great if HUD would revise their streamlined refi guidelines to allow borrowers to keep their existing mortgage insurance premium rates and to allow refinacing from an ARM to a fixed rate product to satisfy their "net tangible benefit" without having to meet the 5% improvement in principal, interest and mortgage insurance payment – especially when the borrower qualifies for the higher payment.  

I'm also in favor of risked based pricing, which HUD tried to implement a few years ago based on credit and amount of down payment.

HUD has been threatening to reduce seller contribution for quite a while now and quite frankly, I've rarely had a seller contriubte the full 6%.  The biggest impact will be when HUD raises the mortgage insurance premiums…again.

…well that's enough from the peanut gallary!

Filed Under: FHA

Just in from HUD on FHA Loan Limits

November 23, 2011 by Leave a Comment

I've been following this because some folks I respect in the mortgage industry have been touting that the former higher "temporary" FHA loan limits are in effect as of November 18, 11.  Tonight I received this from HUD which would lead you to believe this is true:

FHA Update:

On November 18, 2011, the President signed into law H.R. 2112, Consolidated and Further Continuing Appropriations Act 2012 (HR2112). Section 238 of HR 2112 re-establishes the FHA loan limit at the higher of the dollar limit in Section 203(b)(2) or the dollar limit prescribed in Section 202 of the Economic Stimulus Act of 2008 for Forward mortgages.

Forward Mortgages:

Therefore, effective for all Forward mortgages with a case number assigned on, or after, November 18, 2011 through December 31, 2011, the loan limits referenced in Mortgagee letter 10-40 shall be in effect.

As a reminder, Mortgagee Letter 11-29 still applies to the time period 10/1/11 through 11/17/11:

  • Loans that did not have credit approval on, or before, 9/30/11 are subject to the lower limits that were in effect 10/1/11 through 11/17/11.
  • Loans that had credit approval on or before 9/30/11 and FHA to FHA refinances may be eligible for exceptions to those loan limits as defined in Mortgagee Letter 11-29.

The Department will be issuing a Mortgagee Letter by mid-next week that will include more detailed guidance and applicable updated loan limit tables for 2012. We expect supporting system changes to be completed within that same time frame.

With FHA loans, it's important to wait for the Mortgagee Letter or memo from HUD to confirm the change.  Once the ML letter is issued, FHA loans in Seattle will have the loan limit for 1-unit properties of $567,500 applies. 

As of now, Wednesday, November 23, 11, lenders (at least the major banks we work with) are not lending at the higher restored loan limit as of November 18, 2011. It appears this may change…we'll need to wait for the mortgagee letter from HUD and then wait to see when banks and wholesale lenders adopt the changes.

Stay tuned – I'll keep you posted.

Filed Under: FHA

FHA Loan Limits will be higher than Conforming in Seattle for 2012

November 18, 2011 by Leave a Comment

Well it looks like our Congress has passed loan limits for 2012 restoring FHA's higher "temporary" loan limits (pre October 1, 2011) and preserving the current loan limits for conventional mortgages.  

From the press release by the Appropriations Committee:

The bill does not increase the maximum loan limits for Fannie Mae and Freddie Mac. These entities have been under public scrutiny for their questionable businesses practices and use of billions in federal bailout funds, some of which have been used for extravagant management bonuses. The bill limits the increase in the conforming loan limits to only the Federal Housing Authority (FHA), which is subject to greater congressional scrutiny and oversight.

Congress is essentially punishing home owners for the sins of Fannie Mae and Freddie Mac execs. Personally, I think it's too bad that they didn't state this was done to help stimulate private lending instead of using this as an opportunity to publically wag a finger at Fannie and Freddie.

It appears the loan limits for 2012 in King County, Pierce County and Snohomish County for a 1-unit property will be:

  • $506,000 for Conventional
  • $567,500 for FHA

Once the GSE's and HUD officially announce the conforming and FHA loan limits for 2012, I'll be posting them here.

Stay tuned!

Update Nov 22, 11: Here is FHFA's press release regarding the 2012 conforming loan limits confirming they will remain the same for 2012 – except for one county (not in Washington state).

Filed Under: Fannie, Freddie and FHFA, FHA

It’s time for HUD to revamp the FHA Streamlined Refi

November 2, 2011 by Leave a Comment

HUDHUD's Shaun Donovan was recently promoting Obama's jobs bill and the recently revised the Home Affordable Refinance (aka HARP 2.0).  Fannie and Freddie have revamped the Home Affordable Program to reduce the closing cost and eliminate the need for an appraisal on many qualified homes.

From Donovan last week on HARP for conventional refinances:

"…There are still millions of Americans who have worked hard and acted responsibly, paying their mortgage payments on time. But because their homes are worth less than they owe on their mortgage, they can’t refinance….

Just yesterday, the FHFA announced changes that will help more responsible borrowers take advantage of today’s low mortgage rates. These changes will knock down barriers such as closing costs and fees that can sometimes cancel out the benefit of refinancing altogether.

And by creating more competition so that consumers can shop around for the best rates, these changes will save homeowners on average $2,500 per year — that’s the equivalent of a pretty good-sized tax cut…"

With HUD promoting HARP 2.0, I'm hoping that they're taking a strong look at their own FHA Streamlined refinance.  FHA streamlined refi's already do not require an appraisal as long as the loan amount is not being raised over the balance of the existing FHA loan.  

The problem with the FHA streamlined refinance is that with the last adjustment to FHA's annual mortgage insurance and funding fee, it's more difficult to have these refi's pencil out. The annual premiums are so much higher than past insurance premiums that despite today's much lower rates, the higher insurance fees often cancel out the reduced rate benefit. Seattle area and other home owners who are not underwater with their home values may be able to switch to a conventional mortgage (with or without private mortgage insurance depending on the loan to value) and an appraisal will be required to prove the current value of the property.

In my opinion, with FHA streamlined refi's, HUD should either allow a reduced mortgage insurance rate for streamlined refi's and perhaps not offer a credit of the remaining upfront mortgage insurance premium. VA's IRRL loans offer a reduced funding fee of 0.5% for refi's.

Another option would be for HUD to allow the FHA borrower to refinance their FHA mortgage with the same FHA mortgage insurance premiums of their current FHA loan.  

HUD should also make it easier for borrowers with FHA ARM's to be able to do a streamlined refi into a fixed rate program.  Current guidelines require a reduction in payment of 5% and a caps the interest rate at no more than 2% higher than the ARM. If the borrower qualifies for the higher payment and they are opting for a fixed rate program, they should be allowed to do so.  Currently this eliminates borrowers from being able to streamline refi from an adjustable rate to a 15 year fixed.

HUD already has the risk with the loan, why not help Americans with FHA insured loans reduce take advantage of this current low rate environment by making FHA streamlined refinances more feasible? 

Mr. Donovan, it's time for HUD to knock down barriers such as closing costs and fees that can sometimes cancel out the benefit of refinancing altogether for FHA streamlined refinances.

EDITORS NOTE: This post was updated 11/21/2011 with the addition of the paragraph addressing changing the requirement for a steamline refinance out of an adjustable rate.

Filed Under: FHA, Opinion

Conforming and FHA Higher Loan Limits MAY be Returning

October 21, 2011 by 1 Comment

The Senate has passed an amendment that will bring the temporary loan limits back through December 31, 2013!  In the Seattle/King County area, this means that the FHA and conforming high balance loan limit would increase from $506,000 to $567,500.

This still needs to pass the House.

It's like deja vue all over again! Congress yo-yo'd the loan limits a few years ago between the high balance and temporary high balance loan amounts.  Should Congress pass this and restore the higher loan limits, it may take banks some time to adjust to the changes. 

Stay tuned!

Filed Under: Fannie, Freddie and FHFA, FHA
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