FHA News :: A Quiet News Week- Or is it?

About The Author

Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: blog@mortgageprocessor.org.

It’s been a quiet week this week for the most part but two major news items of interest certainly did come up which are worth mentioning along with a few pertinent reminders:

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1. USDA announced depletion of federal funding for the Rural Housing Guaranteed Loan Program. By their estimates, program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

A major difference this time around versus funding shortages of the past is that in this case, once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.” Usually funding for GRH doesn’t run out until the last few months of the year but with the popularity of the program in the current real estate market, the agency has burned through funding much faster than typical.

So, what does this mean for you? Well, if you originate or process rural housing loans, it means you’d best get it in gear and put in your time to get existing loans submitted complete and clean through the systems so you can obtain the non-conditional funding commitment from rural housing! Otherwise your borrowers may be left at the closing table without the funds they need to close their loans and move into their homes!

I suspect the local RD offices will be bursting at the seams trying to keep up with the influx of files they will receive for underwriting so it will be more important now than ever that you all do your best to submit complete and well documented loan files. It makes absolutely no sense nor is it fair to submit files that are incomplete simply to get them in line. There is nothing more irritating and irresponsible than the persons who do so. Make sure, your borrowers are aware of the urgency and that they understand that when you are requesting something from them, it’s urgent and may delay their loan approval and closing processes if they do not comply with what you ask of them!

Something tells me we’ll see funding run out sooner rather than later. There is no indication of when USDA expects funding may be replenished for 2010 but of course, I imagine many are lobbying on capital hill to make sure it happens.

2. The other news that certainly got my attention came in the form of a Discussion Draft I received notice of regarding the proposed FHA Reform Act of 2010. (Copy of the draft available at http://www.house.gov/apps/list/hearing/financialsvcs_dem/fhareform_xml.pdf).

We all know by now that, FHA Up-Front MIP is increasing to 2.25% for cases assigned effective April 5, 2010. This draft proposes increases to the FHA annual/monthly MI rates from the current rates of .50 and .55 percent to 1.50 and 1.55 percent! If this passes, FHA will no longer be a program we’ll be able to rely upon in today’s challenging market. With the significant increases to mortgage insurance rates, the typical first-time homebuyer will no longer qualify as they do currently.

We all continue to watch and wait for anticipated communications from HUD regarding the Mortgagee Letter they’ve promised on the Flipping Waiver. We’re also continuing to wait to receive more substantial information on the implementation of the minimum credit score requirement and the decrease to interested party contribution limits.

The month may have started out as a slow news month but I don’t expect it will end that way!

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