FHA Making it More Difficult for Michigan Homebuyers

FHA is losing money on mortgage defaults and foreclosures, so lending requirements are to tighten in the near future.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

On Wednesday, January 20, an announcement by FHA Commissioner  David Stevens made it clear that HUD intends to raise the bar on qualifying for an FHA mortgage.  Michigan Homebuyers, and buyers across the country should take notice as these changes will start this spring, just when buyers usually turn out in droves with the warming weather.

Let's look at these changes and their affect on Michigan Homebuyers:

• Upfront MIP fee will be increased from 1.75% to 2.25%
  
  
  
  • MIP is a form of insurance that's supposed to fund HUD's reserves to purchase foreclosed properties from lenders (that's where "HUD Homes" come from).  Besides begging for funding from Congress, this is HUD's only way to raise income for their insurance pool.
  
  
  • On a $100,000 loan, this increase means an extra $500.  The MIP is rolled into the loan, so it raises the amount financed and hence the payment goes up on the $100,000 loan by $2.83/month.  Not really a deal breaker for a buyer.
  
  
  
  


• FICO scores under 580 will require a minimum of 10% down
  
  
  
  • Although HUD doesn't have a minimum credit score requirement, most lenders have set internal minimums of 620, 640 or 660.  So, this won't necessarily affect many buyers.
  
  
  
  


• Seller Contribution maximums to be reduced from 6% to 3%
  
  
  
  • This is the BIG ONE.  For many Michigan Homebuyers, coming up with their down payment is the most challenging element of buying a home.  On many transactions, a 6% seller contribution will cover the required closing costs, prepaids & prorations, requiring a homebuyer to only bring the 3.5% down payment to closing.
  
  
  
  


• Increase HUD enforcement actions against lenders
  
  
  
  • HUD is being more aggressive in their investigations and going after lenders that have than average defaults.
  
  
  • If they'd been doing this all along, they wouldn't be suffering the losses they are now and be forced to make the changes above!  Continued government incompetency.
  
  
  
  

COMMENTARY

Let's see, President Obama and most politicians keep sending the message that more homes need to be bought to support the economy.  On November 6, 2009 they extended the Homebuyer Tax Credit and even widened it to include repeat buyers - to entice more people to buy homes.

Now we've got HUD/FHA making it HARDER for people to buy homes.

Does anyone in Washington D.C. talk to each other and coordinate strategies?  Or, is it such a cesspool of lies, deceit and "every politician for themselves", that they just don't care about the American taxpayers and think we're all idiots?

Send me your comments...

# # # 

In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries.  He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor.  He's presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA's, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications.  For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com.  He also publishes his own blog:  http://drewsmortgagenews.com.