DROdio Real Estate

This information is courtesy of the Michael Farrell Team of Countrywide:

New FHA Minimum Cash Investment Requirements on the Horizon
A mortgage letter on the new FHA cash investment requirement (not less than 3.5%, currently 3.0%) is expected in the next 30- 60 days. FHA has indicated that the trigger for this change will be case numbers assigned on or after January 1.

New Permanent Loan Limits
The FHA Stimulus Bill implemented in March temporarily put in place higher FHA loan limits until December 31. Mortgagee Letter 2008-06 states that the limits are effective for mortgages endorsed for insurance on or after the date of the mortgagee letter and remain in effect for those mortgages for which the mortgagee has issued credit approval for the borrower on or before December 31, 2008.

As of January 1, new limits will be put in place and in many areas the new limits will be lower than those currently in effect.

Comparison:
Calculation process for high cost areas in the Stimulus bill that expires on December 31.
Area median sales price multiplied by 125% = maximum mortgage amount (i.e. mortgage limit in effect)
Calculation process for high cost areas beginning January 1.
Area median sales price multiplied by 115% = maximum loan amount

Areas with mortgage limits at the current maximum of $729,750, effective January 1, the maximum loan limit is $625,500
Areas with mortgage limits below $729,750 and above $271,050, limits lowered on January 1.
Example of impact:
Atlanta         current area sales price                $277,000
Current Mortgage Limit                            $346,250  ($277,000 x 125% = $346,250)
January 1, 2009 Limit                             $318,559  ($277,000 x 115% = $318,550)
Area at the current base loan limit of $271,050. (65% of base GSE limit of $417,000) No change to the base loan amount is expected.

Implementation of Risk-Based Premium
Uncertainty on MIP premiums.
In July the 1.50/0.50 premiums were replaced by a risk based tiered pricing. Just recently, Congress stepped in and put the risk-based pricing on hold, for 12-months effective October 1, without  establishing what the MIP will be after October 1. One hint of what may happen is that there is a Section in the Housing and Economic Recovery Act that allows the Secretary to charge an up-front premium of up to 3.00%. No increase in the allowable annual renewal rate was granted.

From the Housing and Economic Recovery Act of 2008.
Sect 2133: For a period of 12 months beginning on October 1, 2008, HUD shall not take any action to implement or carry out risk-based MI premiums, as such planned implementation was set forth in the 5/13/2008 Federal Register notice.

For case numbers assigned prior to July 14, use the old MIP structure (i.e. 1.5% up-front – .50 annually/monthly)
For case numbers assigned on or after July 14 but prior to October 1, use the risk-based premium structure HUD implemented on July 14
For case numbers assigned on or after October 1, use the new MIP structure (to be determined)

Down Payment Assistance (DPA) Restriction
DPAs that require contributions from entities that have a financial interest in the transaction will no longer be allowed by HUD effective October 1. Suntrust and GMAC have already terminated the use of DPAs.

From the Housing and Economic Recovery Act of 2008.
Sect 2113: Includes language explicitly prohibiting the following sources from contributing funds the mortgagor's cash investment:
(i) the seller or any other person /entity that financially benefits from the transaction; and
(ii) any third party/entity that is reimbursed by any other parties in (i)
This prohibition shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.

Ttimeline for accepting loans using DPAs.
The last day to accept new applications for FHA Loans with Seller/Interested Party Funded DPAs is September 1, 2008.
Loans that will be using Seller/Interested Party Funded DPAs must be "Credit Approved" by September 30, 2008
Loans that are "Credit Approved" on or after October 1, 2008 are subject to the new policy, that is, Seller/Interested Party Funded DPAs are not allowed

Buy and Bail Policy
FYI - HUD is working on a "Buy and Bail" policy.  I will keep you informed as information becomes available.

Please note that the information provided is based on the most current information available but is subject to change.

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This entry was posted on Friday, August 22nd, 2008 at 11:54 am and was filed under All About Home Financing & Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.