Tri-Valley Mortgage News

Recently HUD has proposed several changes to protect its insurance fund reserves. As a result of the currently tightened credit market, FHA loans continue to play a large part in housing recovery. For this reason HUD has outlined the following changes as being integral to FHA's stability:

• Increased mortgage insurance premiums (Up Front MIP). Currently set at 1.75% of the sales price/appraised value, the new UFMIP will be increased to 2.25%. Remember that this is usually financed into the new loan but can also be paid by the buyer or seller at closing. This change is set to go into effect for Case Numbers pulled after April 5th 2010.
• Minimum credit score in relation to down-payment: Borrowers with FICO scores under 580 will be required to put down 10%. All others will still take advantage of the 3.5% down-payment requirement. Since most lenders currently require scores of at least 620 (and many 640) we don't expect this change to affect too many potential buyers but it will be interesting to see if this change opens up a new market for sub-prime credit buyers.
• Maximum allowable seller contributions: Currently FHA allows a seller to credit a buyer up to 6% of the sales price. This will now be reduced to 3% which is more in line with industry standards and it is hoped will reduce incentives to inflate appraised values.

As was noted by Rob Chrisman, a 30 plus year secondary marketing executive, "most agree that the changes announced to FHA underwriting seem to be less restrictive than anticipated and more supportive of mortgage credit availability and the housing market at the expense of minimizing losses to the MI fund."

If there is one thing we can all count on these days in the real estate industry it is change and more change!  At Diversified Mortgage you can count on us to be up-to-date on these issues.