FHA to toughen rules for borrowers

The Federal Housing Administration (FHA) is proposing raising minimum credit scores for borrowers who receive FHA-backed mortgages, increasing down payment requirements, and limiting the amount of money sellers can provide toward closing costs. The proposed changes are part of an effort to shore up the agency’s finances, which have been hit with rising defaults to its mortgage insurance program.

MAKING SENSE OF THE STORY
Historically, the FHA has played a critical role in propping up the housing market by insuring lenders against default after the mortgage market failed. Currently, the agency guarantees approximately 30 percent of all home loans and 20 percent of refinancings. In the past, the FHA has resisted raising down payments or insurance premiums, fearing it would be shutting out qualified borrowers and stunting the housing market’s recovery.
The FHA is hoping that the proposed changes, including requiring that borrowers bring more cash to the closing table, will ensure that borrowers are less likely to default on their loans. Officials at FHA have yet to determine how much cash will be required.
Up-front cash can include down payments as well as other payments. Currently, FHA borrowers can put down as little as 3.5 percent. One lawmaker has introduced legislation that would require FHA borrowers to put down a minimum of 5 percent.
The agency also currently allows sellers to provide up to 6 percent of the home’s value toward closing costs or down payments. Secretary of Housing and Urban Development (HUD) Shaun Donovan has said he wants the maximum permissible level to be lowered to 3 percent, in line with industry norms.
The FHA has decided “for the time being” to raise its minimum credit score requirements for new borrowers. The new requirements have yet to be determined. Presently, borrowers with credit scores as low as 500 may qualify for an FHA loan.

Avoid Foreclosure With New Short Sale Plan

Best Wishes for Thanksgiving Day

A walk around Lake Balboa is a refreshing break from the high winds in Porter Ranch today!

Congress Passes Homebuyer Tax Credit

After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.

The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.

For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.

The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.

REO Buyer Can Select Escrow and Title

Effective October 11, 2009, the Buyer’s Choice Act prohibits an REO lender selling residential property up to four units from directly or indirectly requiring the buyer to purchase escrow services or title insurance from any particular company. A buyer, however, who has received written notice of the right to make an independent selection, may agree to the REO lender’s escrow or title recommendations. An REO lender that violates this law can be held liable for three times the charges the buyer incurred, whereas a violation by the seller’s agent may be subject to license disciplinary action. This law expires on January 1, 2015. CA Assembly Bill 957.

New home sales at historic low

New home sales in California remained at historic low levels in August, signaling that the state’s housing sector may be slow to recover from a stubborn recession, according to a recent report from the California Building Industry Association (CBIA).
“While there are some encouraging signs in California housing markets, activity remains low,” said CBIA President and CEO Liz Snow. “These reports are evidence that housing markets remain depressed and continue to hamper a broader economic recovery in California.”
During August, 2,617 new homes and condominiums were sold in the subdivisions tracked by Hanley Wood Market Intelligence (HWMI), compared with 3,001 for the same period a year ago, a 12.8 percent decline. Sales of single-family homes were down by 20 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 35 percent and sales of condominiums were 26 percent higher than a year ago, according to the CBIA report.

Banks bite bullet on loans

A new report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision shows that the portion of loan modifications in the second quarter that involved reducing the principal increased to 10 percent from 3.1 percent in the first quarter.

While strategies such as lowering interest rates or extending mortgage terms can temporarily help borrowers struggling to make payments, reports show that often times borrowers redefault because the modifications do not lower payments to a truly affordable level. Of loans modified in the first quarter of 2009, 28 percent were in default again within three months, according to the Office of the Comptroller of the Currency. Among those modified in last year’s second quarter, 56 percent were in default again a year later.

Banks are beginning to reduce mortgage principal due, in part, to prodding from the Obama administration, whose housing plan includes financial incentives for mortgage-servicing firms that modify loans. At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital.

368 Pine Dr, Lake Arrowhead, CA 92321 – Zillow

368 Pine Dr, Lake Arrowhead, CA 92321 – Zillow

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C.A.R. Mortgage Update

New rules
Beginning Oct. 1, new rules adopted by the Federal Reserve went into effect, requiring greater diligence on the part of mortgage lenders and brokers who issue high-cost loans for borrowers with less than favorable credit. The interest rates on these loans are at least 1.5 percentage points greater than the average prime mortgage rate. The regulations, which were finalized in July 2008, prohibit lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not through a foreclosure sale.

During the height of the market, subprime lenders often would offer loans without requiring borrowers to provide proof that they could make the monthly payments. In some cases, borrowers used stated income loans, which allowed some borrowers to fabricate annual income figures and buy homes without down payments.

Although many believe the Federal Reserve’s new rules represent one of the more substantial efforts on the part of the federal government to combat such lending practices, some consumer advocates are concerned. According to a policy associate at the Center for Responsible Lending, the new regulations do not cover option ARMs, which enable borrowers to choose from several monthly payment options during the loan’s early years.

Porter Ranch Neighborhood Council

http://www.prnc.org/