In a recent Washington Post article written by Kenneth Harney last weekend introducing new mortgage fee increases, for FHA loans and stricter down payment rules and higher credit score requirements from HUD, Fannie Mae and Freddie Mac as soon as April 1st.  According to the article, “Most major FHA mortgage lenders are already pricing in these higher fees, effectively raising costs to borrowers immediately and reducing the impact of housing stimulus efforts from Congress and the Obama administration.”

Falling FHA Mortgage Rates

The new FHA loan guidelines mean that even borrowers with good credit scores will be charged more for a mortgage loan unless they can make a down-payment of 30% or more.  Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.  Harney points out, fico scores in the upper 600s were deemed good enough for prime rate home financing just a couple of years ago. Now some borrowers with credit scores of 720 to 740 may not be enough to prevent an add-on fee to their FHA home loan, especially if they are buying a condominium or town home.

Potential home-buyers need to do all they can to increase their credit score and to accumulate enough funds for a more substantial down-payment, both moves which make good financial sense anyway.  But the best home loan solution is the basic FHA mortgage: Apply for an FHA loan, which requires a down-payment of just 3.5% and in most cases has lower credit score requirements.  FHA mortgage rates remain at record levels with national lenders reporting interest rates as low as 5.25% on 30-year fixed rate mortgages.

“In today’s weakened economy where access to credit is being restricted, we need to make home mortgages more available to households throughout the country, and especially in high-cost areas,” said Preston. “These new FHA loan limits will ensure HUD can to continue aid distressed homeowners with safer home refinancing featuring secure fixed rates from affordable government-insured loans that enable many first-time buyers take advantage of today’s buyers market”

FHA mortgage loan limits were increased recently back to 2008 FHA loan limits in high cost housing areas, too -- to a maximum of $729,750 in some areas. Visit the FHA website to check the FHA loan limits for your area.  This website enables consumers to look up the maximum FHA mortgage limits for your area or several areas, and then list them by state, county, or Metropolitan Statistical Area.

Obama has made clear that he understands how paramount the FHA mortgage loan system is for revitalizing the housing markets from a local and national level.  Low interest rates and comprehensive FHA loan programs are essential for America to rebuild its credibility with homeowners and new homebuyers.  Most mortgage insiders believe that Obama understands the importance of recapturing property values that will help many families get back on their feet.   The Obama Administration will likely move quickly to reestablish credibility for American home financing.  FHA mortgage rates remain at the lowest levels ever.  Today a qualified borrower could take out a FHA mortgage with a fixed interest rate for thirty years at 4.75%. 

Many believe that Barrack should review a few of the FHA home loan products and provisions to see which loan programs are succeeding and which products are missing the mark.  Hope for Homeowners was a program passed over the summer as part of the FHA mortgage reform package. In a recent report, FHA loan pros said that as of “October 1st and HUD has allegedly allotted 22 people to the program.”  They would not confirm it, but clearly their reports and articles were blowing much needed whistles on the government loan relief programs that were supposed to be saving homes and giving new opportunities to homeowner that were able to qualify for home refinancing.

According to congressional testimony by James A. Heist, HUD’s assistant attorney inspector general for audit, “it is our understanding from the Department that funding for 22 staff positions and approximately $20 million for system improvements have been made available for the Hope for Homeowners program.”  Mr Heist does not say HUD has actually deployed 22 people to work on the H4H program, he only says “it is our understanding” that money has been made available for this purpose. This is hardly re-assuring and, in fact, there is no evidence that anyone at HUD is actually doing anything. How do we know? Well HUD’s figures as of December 31st — three full months after the H4H program began — show there have been 370 program applications but that “no Hope for Homeowners cases have been insured to date.”  Look for Congress to investigate the Hope for Homeowners program and while they’re at it expect them to review the FHA Secure loans as well.