FHA Updates and Issues 1/28/2010
January 28th 2010 01:16 pm
By now you may know that FHA is waiving the 90 day flip rule as of February 1st, 2010. Remember that there are a few restrictions: 1) It is only a 1 year waiver of this rule to try to help move inventory. 2) If the sales price is 20% higher then the sellers acquisition costs, then the seller has to justify the increase with a list of improvements or if there are no improvements made, the appraiser has to explain the increase. 3) It has to be an arm’s length transaction with no interested parties buying and selling.
In one of my previous updates, I mentioned that FHA was considering several options to try to shore up their risk management. So it is no surprise that you may have heard all kinds of rumors out there about FHA loans raising the mortgage insurance, lowering the down payment to 5%, lowering the amount of seller concessions, and imposing a minimum FICO score. Some of this is fact and some of it is not quite fact…yet. The fact is that the Up Front MIP will go up to 2.25%, from 1.75%, for case numbers assigned on or after April 5, 2010. The monthly MI will not change. The other change really should not affect anything, but a buyer now has to have a FICO score of at least 580 to be able to use the 3.5% down payment. If it is under 580 then the down payment will be 10%. However, to my knowledge, there is not an investor out there that will even allow a minimum score below 580. CHFA allows down to 580, as of right now anyway. But all of the other main investors that I am aware of require a minimum of 620 and there is even one that has a 640 minimum.
The other items I mentioned above may still be under consideration but have not been decided on and I believe that FHA will wait to see if these current actions will help them with their risk management before they go too crazy with those other ideas. But you never know. I will keep you up to date if and when things change.
Let me know when I can help or if I can answer any questions. Thank you, Mark
A great site for all things REAL ESTATE is www.insiderealestatenews.com This is edited by John Rebchook, formerly of the Rocky Mtn News.