A big news week for downpayment assistance, FHA and conforming loan limits

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This week brought forth two BIG news pieces which will lead to greater FHA volume across the country and add additional opportunities for processors.

The first came on Monday from Nehemiah when they announced another victory in their fight against HUD had been won in a California court. Other downpayment assistance providers like Ameridream and Preferred Program followed suit by issuing their own press releases shortly thereafter.

You’ll find a copy of Nehemiah’s press release at http://www.nehemiahcorp.org/pressMediaDisplay.cfm?incl=pr/03032008.cfm.

You can read Ameridream’s announcement at http://www.ameridream.org/About/PressReleases/2008/JudgeVacatesRule.

You’ll find Preferred Program’s news and timeline of related court actions at http://www.preferredprogram.org/HUD/Update.aspx.

This was BIG news as the future of seller funded downpayment assistance options for FHA buyers has been in question for many months. With the victories this week in the California court, DPA options will remain an allowable source of funds for buyer downpayment at least until an FHA reform bill passes on Capitol Hill. The FHA reform bill seeks to wipe out seller funded downpayment options as a resource for FHA buyer closing funds but that bill has been going back and forth in Washington since spring of 2006 so one cannot hinder a guess as to when it might actually be passed.

There has never been a better time for FHA lending in combination with downpayment assistance options because with the current market, many properties have been listed at reduced prices and sellers are very willing to lower their agreed-to purchase prices. As long as property values are higher than those prices, it is simple to add in seller credit amounts for buyer costs and downpayment assistance for the three percent minimum investment required for FHA purchase.

As long as the DPA provider is considered tax exempt by the IRS, most FHA lenders allow the use of their programs. However, one of your responsibilities as an FHA processor is to check the lender’s guidelines to make sure particular providers are allowable to them and you must also verify and include documentation in the FHA submission proving the tax exempt status of the DPA organization.

I highly recommend sticking with the “big boys”- Nehemiah, Ameridream and Preferred Program are the three largest and most established DPA providers and I estimate their tax exempt status is secure with the IRS. These resources also provide free marketing materials, training and even provide first time homebuyer education sessions for homebuyers as well as counseling for those who run into financial difficulties.

You’ll find the websites as great sources of information.

For Nehemiah, go to www.getdownpayment.com
For Ameridream, go to www.ameridream.org
For Preferred Program, go to www.preferredprogram.org

The second piece of important news was released late on Thursday from HUD. Mortgagee Letter 2008-06, which you will find at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/08-06ml.doc, announced temporary FHA maximum mortgage limit increases across the country. These new loan limits are the result of HR5140 which was passed on February 14th. You can find the new FHA max loan limits for your area by conducting a search at HUD’s website at https://entp.hud.gov/idapp/html/hicostlook.cfm. These limits are to remain in effect until at least December 31, 2008.

Be sure to wait for lender bulletins which will announce their acceptance of loans locked under the new loan limits. (I would expect they will start pouring in today).

Fannie Mae has also announced new jumbo-conforming loan limits on March 6th of this week. You’ll find Fannie Mae’s Announcement 08-05 at https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0805.pdf along with a jumbo-conforming product matrix at https://www.efanniemae.com/sf/mortgageproducts/pdf/jumbomatrix.pdf.

You’ll find the link to a list of areas eligible for the temporary higher loan limits and the limits for each area with drop-down menus to allow sorting and viewing by county, state, or MSA at https://www.efanniemae.com/sf/refmaterials/loanlimits/jumboconf/index.jsp. Fannie also plans to offer recorded sessions and additional information at their website by April 1st.

Freddie Mac has yet to release an announcement of their policies regarding the jumbo-conforming loan limits and I verified with their customer service department on Friday, March 7th that there is no anticipated release date as of yet.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.