Written By: Bonnie Hild, Op-Ed Writer
Yes, it is, grim that is, and I am not referring to Wilhelm & Jacob Grimm. But just as they composed those fairy tales in the 1800’s, representing what might have been described as the capricious and cruel reality of daily life for most Europeans of that time, we to continue to face a housing and mortgage market that can also be described capricious. Unlike the tales of Brothers Grimm however, the ails of the current housing market do not seem to be getting softer or sweeter with time.
As loan originators continue in their struggle to find a qualified borrower, which is no easy task these days when considering the burdens brought about by new federal legislation and investor overlays, support staff seems to have slowly come to terms with the harsh reality that they are now considered a billable expense. In such a capacity, underwriting consistently needs to approve as many cases possible while completing all the due diligence required to clear a post endorsement technical review as well as pass muster with the investor, again no easy task when you consider the quality of some of the cases being submitted to underwriting. Things however, are never as difficult as they seem and as with anything else, sometime you simply need to look in another direction to find the horizon.
In 2007 the door seemed to close on the mortgage market as we knew it. The one in which even a used car salesman could get a job as an originator and make $250,000 per year, a time when property values appreciated at a rate of 66% a year and of course, a time when everyone qualified. These days, the mortgage industry is not so forgiving and in some cases, even pristine borrowers are running into problems when trying to obtain financing. As we now navigate our way in this housing market, one defined by new rules, stringent lending guidelines and declining property values, we find ourselves revisiting the few things that we could always depending on where this industry is concerned, one of them being FHA insured mortgages, a different horizon.
There are still several programs available utilizing this type of financing for borrowers who simply do not fit into the conventional mold, many of these programs designed to assist with niche scenarios, such as the purchase of foreclosure sales or even short sales. The 203k, which is HUD’s renovation product has been invaluable in the area in which I underwriter, simply because many of the counties in which the state I reside seem to be ground zero where foreclosure rates and declining market values are concerned.
Albeit, the program can still be somewhat cumbersome and for individuals who lack a solid understanding of the program, that can be downright overwhelming, but HUD is working on improvements which will hopefully improve the ease and overall usefulness of the program. Take for instance Identity of Interest. We all know this rule is not written, just simply implied. However it causes undue hardship for borrowers in some instances simply because the borrower may often receive a lower bid quote on the renovation piece from a family member then they may from a contractor they don’t know.
At this time, HUD is actually considering doing away with the implication so that these types of business relationships do not impede the borrower’s ability to use a family member to complete the rehabilitation. Additionally, lifting the moratorium on the investor 203k is still a real possibility. It just simply needs to become a priority at a federal level. Not only will the availability of this type of program generate new business opportunities for mortgage professional and lenders but will go a long way in revitalizing properties located in severely declining markets which may help to stabilize some of those communities. Additionally, it will help eliminate some of the burden that investors now face in obtaining mortgage money required to purchase these distressed properties.
In closing, I simply want to reiterate that where there is a will, there is a way. Utilize FHA, learn the 203k and put it to good use. Opportunities’ for the program are endless these days and any new source of revenue is a good one. For those of you who would like more information on the program, HUD’s webpage www.hud.gov is a good place start, otherwise some training is something else to consider. Also consider other programs insured by the Federal Housing Administration and put those in your arsenal of products offered to qualified consumers and as always, happy underwriting.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".