Mortgage Changes

I received an email this morning from The Mortgage Standard which spells out more Mortgage Changes within FHA (Federal Housing Administration). The articles indicates the Administration; FHA plans to announce it will tighten lending standards to try to stem rising defaults.

From the above articles it indicates that there is some short sale-flipping and other types of fraud on the rise within the market. Short sale means that the property is sold for less than what is owed on it and Flipping means a property is being bought and sold immediately again.... Bad news and everybody is going to pay but this is what happens when people get into trouble and need to get out from under their burden which they cannot meet. I was under the impression that flipping had long since stopped because of the already guidelines in place that the owner had to have owned the property for a least 1 year. As they say things somehow have to get worse before they get better.

It seems that the Administration plans to increase the up-from cash paid by borrowers, raise minimum credit scores for borrowers, and limit how much money the sellers can pay, including paying closing cost or giving free upgrades.

The maximum Sale Price will stay the same at $417,000 for conforming loan amounts. If you remember some years ago, this maximum loan amount was not available for FHA. The changes occurred during the time that everybody was about to get into trouble and this was to help those who could not put as much money down; 5% from their own funds etc.

It is my belief that Mortgage Changes will continue until all the fraud stops (which may never be) and it is a shame. What happens when the seller is paying the 6% closing cost that has been allowed up until now, this 6% has been added in the Sale Price. Most sellers want a certain amount of equity in their hands at closing and will not pay the 6% out of that, so the Sales Price is raised. The Appraiser must get the value to be the same as the Sales Price or the borrower is going to have to come up with the funds over and above the value (unless the seller reduces the SP) as the loan amount is calculated and value determined upon the lower of the Sales Price or Appraised Value. 

Reason for the fraud is that investors (non-owner occupied) borrowers are trying to buy up all of the lower priced housing and become Real Estate Moguls at the expense of the person who needs relief of making the higher mortgage payments.  It is also at the expenses of lowering the overall value of the housing in any one subdvision and more specifically on your street or close to your home.  Anytime there are foreclosures or short sales, it will lower all of the value in that particular area and this is bad news for those that occupy a home within these areas and do no plan to move. 

 I do realize that some owner have no choice but to try to get free of the payment they cannot afford, but the short sale should be your decision not someone coming to you off the street and telling you that they will buy your home on a short sale.  Yes, your mortgage lender will probably allow this but this is a decision that you should make on your on not to be implemented by some who is buying up real estate for their own profits.  There are other options which exist to include:  Forbearance, modification, deed-in lieu, and with the President's plan, you should be able to work out something with your lender, if you want to stay in your home.  Talk to your mortgage company, if they are not willing to try to help you stay in your home, then you need to get in touch with the President's office.  You can email the White House and find the email on line @ www.whitehouse.gov . 

There will forever be changes in the Mortgage world and especially when things are not going well and eventually the rates will rise.  The main things to do in this market is be informed and make sure you are getting the right deal.