HUD is now approved to insure FHA home loans worth up to $400 billion. This is a significant rise from $315 billion last year.  The mortgage bill also mandates that FHA mortgage loan limits from fiscal 2008. This means the FHA loan limits will still allow loan amounts up to $729,750 in certain areas.

Gone are the days when HUD could copy Fannie or Freddie when setting FHA loan limits for the counties in the 50 states.  No more can HUD say “ditto” when it comes to home loan limits, because Fannie and Freddie are silent and appear to be disenchanted with the government bail-outs that have ran-sacked the mortgage industry over the last 3 years. So with 2010 FHA loan limits all set, consumers looking to FHA for home financing have real numbers to work with. It also helps FHA lenders and brokers, because banks usually won’t roll out new loan programs with government loan limits up in the air. Consumers have been blessed with record low FHA mortgage rates in 2009 and this is clearly good news for FHA rates in 2010.  When considering refinancing or a purchase mortgage, check with HUD for local loan limits set by county for each state. 

Peter Bell, president of that National Reverse Mortgage Lenders Association testified that “a reverse mortgage must occupy the primary lien position on a property. All other home loans must be satisfied with reverse mortgage proceeds. If some of the proceeds available from the reverse mortgage are diverted to a tax and insurance escrow, in some cases, there would not be enough money left to satisfy the liens. In such cases, the homeowner would not be able to obtain the reverse mortgage – and probably be forced to give up the home.  “Instead of simply imposing an escrow, HUD (in partnership with a NRMLA Task Force on tax and insurance issues) is looking at utilizing the financial assessment tool to determine if the lender and counselor should work with the borrower to establish an escrow, amend the draw-down schedule, limit payment options, disallow a lump sum payment or take other steps appropriate to help protect borrowers from tax and insurance defaults. One obstacle here is that the Home Equity Conversion Mortgage statute requires all five payment options available under the program to be offered to all borrowers, restricting HUD and lenders’ ability to take appropriate action.”

FHA mortgage rates have risen from record lows since the MBA’s prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs.

In March, the MBA boosted its forecast of mortgage originations by more than $800 billion but reversed most of that expected increase with Monday’s revision.  Average 30-year loan rates have slipped from recent peaks but at 5.38 % last week remain well above the record low 4.78 % set in April, Freddie Mac reported on Thursday.  The higher mortgage rates have quelled home refinancing demand.  The MBA’s index of mortgage refinancing applications in the week ended June 5 sank to 2,605.7 after hovering between about 5,100 and 6,800 from the March 20 week through the end of April.

Estimates of home loans moving through the Home Affordable Refinance Program, using Fannie and Freddie, have also fallen short.  According to Jay Brinkmann, MBA’s chief economist, “While generally accepted estimates were that around 1.5 to 2 million borrowers might avail themselves of this FHA loan program, with many more potentially eligible, to date only about 13,000 loans have been completed according to press reports.”

Though the FHA home loans created under this program should increase, volume is unlikely to come near forecasts, he said.  FHA home purchase loans are also expected to be less than expected in March. Falling prices mean lower loan sizes, and homes bought in foreclosure and by investors are often done for cash, the trade group said.

The MBA expects total existing home sales in 2009 to drop 1.2 % from last year to 4.8 million units. New home sales will slump about 27 % to 352,000 units, the group said.”Median home prices for new and existing homes will likely continue to fall, dropping by about 10 % from 2008 levels, but leveling off in 2010 as the economy improves,” Brinkmann said.

FHA continues to offer great 1^st time homebuyer programs with new home financing requiring only 3.5 percent down. FHA mortgage lenders remain optimistic that Hope for Homeowners may help some of their borrowers prevent foreclosure. Home financing guru, Jason Cardiff said, whether its FHA or a loan modification, homeowners need to get up and do something to stop foreclosure.  Cardiff continued, “Lenders are offering loan workouts like we’ve never seen before, so contact a mortgage lender to refinance or seek counsel from a law firm that has a good track record of loan modifications with your mortgage lender.”

Federal Rate Cut Lead to Lowest Mortgage Rates Ever

www.youtube.com/watch?v=E2M1CE33j8I

The Federal Reserve cut the federal funds interest rate on Tuesday The Fed cuts the benchmark interest rate to nearly zero, and CNBC’s Diana Olick said this might help lower mortgage rates. Susan Wachter, a professor of real estate, finance and city and regional planning at the Wharton School of the University of Pennsylvania, said cutting the interest rate will help change the housing market and move toward a bottom on housing prices, although it may take a while for banks to start originating much need mortgage loans. Olick added that to get those cheap rates, buyers must have impeccable credit and money to put down on the home loan.

Metro Housing of Flint is a non-profit agency. If you’re about to refinance, they suggest waiting until Wednesday before locking in your mortgage rates. “It’s going to be an impact day, and you’re going to see the interest rates hover and loan officers remain excited because of the significant amounts opportunity for home refinancing. It’s going to be a big day,” Crews predicted. If you have bad credit, or if your mortgage balance is greater than what your house is actually worth, qualifying for a refinance loan will be impossible.  Mortgage rates are low, but lending guidelines are tighter than ever.  Mortgage refinancing can be tricky, but not impossible. “Every time there’s a strategy. What happens is we don’t want to do the strategy, and we want to do it now, but we have to take the steps and get there,” Crews advised. 

To ease the confusion, Metro Housing is offering free seminars titled “Know Your Loan, Save Your Home.”  “We need to know what your rates are. We need to be able to look at your credit, and what the recapture period is. Then we can figure out what products can get you back to a safe place,” Crews explained.  If mortgage rates drop again on Wednesday, there’s no way of knowing just how long they will remain that low. Metro Housing’s best advice is to get your act together now, before you miss your opportunity and it’s too late.  “Know your mortgage. If you don’t take action, it will pass you by,” Crews said.

Why the Fed Meeting Matters so Much…

www.youtube.com/watch?v=1Xt9yt-pzVY

But in the 2009 FHA loan limits are being reduced again.  FHA announced the new ceiling in the high cost markets will be $625,500. FHA mortgages in 2009 will cap out at 115% of the median home price in a county or metropolitan area. Still, many regions of the housing market will remain, as never before, eligible for FHA home loans.

o    FHA home loans can only be originated from a FHA-approved mortgage lender.

o    Down payment requirements are minimal. Buyers need only 3.5% of the house’s price tag.

o    The down-payment can be a gift from a family member, employer, local charity, or local government program.

o    FHA mortgage programs enable all ranges of credit scores with compensating factors

o    You must have a two-year employment record. The new monthly FHA mortgage payment must be less than 31% of your income, and debt to income ratio is usually less than 43% of your income.

Read the complete FHA Loan Article >.

FHA home purchase loans only require 3% down-payments so if all goes well, you will be able buy your 1^st home by the time you get back from your honey moon.  FHA home loans provide many benefits, like low fixed mortgage rates and the ability to do a FHA streamline refinance any time the interest rates drop.

The increase in federally-insured loan programs should hardly come as a surprise. The subprime and conventional mortgages have been impacted by the lack of bank lending.  Private and portfolio lending is being done more as they account for 88.2 % of all mortgage loans closed. But the FHA home loans being made today are objectively better than the junk seen during the past few years because mortgage lenders are requiring documentation and eliminating negative amortization mortgages, interest-only loans and other forms of risky financing.  FHA mortgage loans make sense because they have no penalties for early termination and no balloon payments due. Private money has begun to carry the FHA mortgage market.

Other details from the MBA report include:

o    The refinance share of all originations was 61.7 % in the first half of 2008, compared to 54.8 % in the second half of 2007. The % of home refinance loans for rate or term purposes increased from 38.1 % in the second half of 2007 to 48.6 % in the first half of 2008. The refinance volume also increased 5.8 % in the first half of 2008, based on data from repeater companies, which are participants that responded to the survey in both halves.

o    For 1^st mortgages, fixed-rate mortgage loans, excluding interest-only loans, accounted for 78.5 % of the dollar volume of originated home loans in the first half of 2008, compared to 63.6 % in the 2^nd half of 2007.

o    In the 1st half of 2008, 82.7 % of all origination dollars were for prime loans, compared to 79.0 % in the 2nd half of 2007, 3.8 % were non-prime, compared to 7.5 % in the 2nd half of 2007, and 1.7 % were Alt-A, compared to 7.8 % in the second half of 2007.

o    Originations of mortgages with deferred amortization (“interest only” or “IO”) continued to decrease significantly for both fixed and adjustable rate mortgage programs from the 2nd half of 2007. IOs accounted for 10.6 % of originations in the 1st half of 2008, compared to 22.4 % in the second half of 2007.

o    In the first half of 2008, first-time homebuyer purchases represented 29.9 % of the volume of purchase fundings, compared to 27.9 % in the second half of 2007. They represented 32.2 % of the number of purchase loans in the 1st half of 2008, compared to 30.2 % in the 2nd half of 2007.

o    Estimates from MBA’s Mortgage Finance Forecast further demonstrate the trends in originations as purchase money loans were down by 16.2 % in the first half of 2008 compared to the 2^nd half of 2007. Refinance fundings increased 16.3 % in the 1st half of 2008 compared to the 2nd half of 2007.