JimHungerford.com

FHA announced it will raise mortgage insurance premiums and update the combination of FICO scores and down payments for new borrowers.

 Announced Policy Changes:

1)  Mortgage insurance premium (MIP) will be increased.

•  Raise up-front MI (increase the loan amount)
• Second step would be to increase the annual amount (increase monthly payment)
• Should go into effect this spring

2)  Update the combination of FICO scores and down payments for the new borrower

• Increase the FICO score to 580 (most lenders will not take anything under 620).  Credit less than 580, will be required to have 10% down payment.

3)  Reduce allowable seller concessions from 6% to 3%

• Expected sometime early summer

4)  Increase enforcement on FHA lenders

• Publicly report lender performance rankings

HUD Takes Action to speed resale

FHA will look at allowing a buyer to purchase a home where the seller has owned the property for less than 90 days.  The policy change (waiver) will take effect February 1, 2010 and is effective for one year.

The waiver will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.  However the waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.