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Wednesday, September 18, 2013
FHA Cuts Time for Previously Foreclosed Homeowners to Obtain New Mortgages
4:17 pm cdt
Homeowners who were laid off and lost their homes to foreclosure could qualify for a new mortgage in as little as
a year under an unprecedented federal rule change that slashes the usual waiting period between financial disaster and buying
a new house.Lenders regard the changes with some skepticism.
Normally, homeowners who were foreclosed on must wait three years before they can qualify for a loan backed by the
Federal Housing Administration. FHA loans require only a 3.5 percent down payment and have more lenient lending standards
than conventional loans, though borrowers have to carry long-term mortgage insurance. Getting a conventional loan after foreclosure
can take up to seven years.
The new changes allow borrowers who meet a set of strict criteria to qualify for an FHA
loan only 12 months after losing their house for failure to make payments.
"To get A-paper institutional financing
so soon after a foreclosure is unheard-of," said Brent Wilson, with Comstock Mortgage in Sacramento, Calif. "It
should increase the buyer pool throughout the country."
The FHA announced the changes Aug. 15 in a letter to lenders
titled "Back to Work: Extenuating Circumstances." Officials say it was meant to acknowledge the reality of the recession,
with its mass layoffs, and to help people return to home ownership.
"We've just been through an economic shock in
this country when people lost their jobs through no fault of their own," said Brian Sullivan, spokesman for the U.S.
Department of Housing and Urban Development, which oversees the FHA. "Now we're in a recovery, and many borrowers have
become re-employed and are able to sustain a mortgage again."
To qualify, borrowers must fit the FHA's profile of
those who deserve an early second chance.
They must have lost their homes in a foreclosure or short sale because they
were unemployed or experienced a big drop in household income due to circumstances "beyond the borrower's control."
They have to show they have recovered financially and otherwise have a clean credit record. And they have to complete housing
The new guidelines are gradually gaining attention.
"We're still in the digestive mode," said Dan Starelli,
senior vice president with Umpqua Bank in Sacramento.
Some say the new rules are a breath of hope for former homeowners and
for the housing market, which would benefit from a new pool of potential buyers.
"There are a large number of
people who are going to fit these criteria," said Chris Little, president of the Sacramento Association of Realtors.
"For a lot of people, it could get them back in the game."
Sooner is probably better for buyers, he said.
strong upward pressure on home prices in the past year, they remain far below the peak of last decade's bubble. Mortgage rates
have risen from a low of less than 3.5 percent earlier this year to around 4.5 percent today but remain a bargain in historical
Cash-paying investors have dropped out of the market as prices rise, leaving room for those with FHA loans and lower
down payments to jump in after being virtually shut out for most of the past year. A growing supply of homes for sale is also
helping to stabilize the market.
"There are so many fewer cash buyers," Little said. "Prices are floating
up to where investors don't perceive it as the screaming deal they did a year ago. It allows (traditional buyers) a better
crack at getting into the mix."
Pat Shea, president of Lyon Real Estate in Sacramento, said many buyers have been waiting
for a chance to take advantage of prices and interest rates that are still relatively affordable.
Real estate agents
and homebuilders have been counting on these so-called "boomerang" or "recovery" buyers to help bolster
sales in the next few years.
"These people owned homes before," Shea said. "They want to own homes again.
There will be hundreds of buyers coming back."
with Umpqua Bank, said his financial institution is unusual because it services its own loans. That means it can start implementing
the new FHA standards without holdup.
From our standpoint, we're going to go directly with this guidance," he said.
many other lenders sell packages of loans to investors, who have their own underwriting criteria.
FHA makes the changes doesn't mean all lenders will do it because the investors won't allow it," Starelli said.
Many people lost their jobs and homes in the recession more than three years ago and can already qualify for an FHA
loan, he noted.
Starelli also said he thought it was unlikely that someone who went through a foreclosure only a year ago would have
recovered their income and creditworthiness enough to meet the FHA's new standards.
Comstock's Wilson said he thinks the
FHA's changes are meant to increase business after it raised its mortgage insurance premiums earlier this year and extended
the insurance payments over the life of its loans. The changes make FHA-backed loans more expensive and less attractive than
they once were, driving away borrowers, he said.
"I'm a big fan of conventional financing," Wilson said. "I
advise against FHA as much as I can if people are qualified."
(c)2013 The Sacramento Bee (Sacramento,
Visit The Sacramento Bee (Sacramento, Calif.) at http://www.sacbee.com
Thursday, September 5, 2013
3:16 pm cdt
I haven't blogged in a while because things have been super busy, which is good. I just want to make
a quick statement to anyone who is "on the fence" right now about buying, either because you think rates are going
to go down again, or you're afraid the market is not yet at it's bottom. I don't believe either to be true, and market indicators
seem to agree.
Even though a 30 year fixed mortgage is getting into the 4's now doesn't
mean it's a bad deal, and I don't think that there's going to be much going down. Can you imagine that when my parents bought
their first home the rate was almost twenty percent? When I first started my practice rates were in the sevens and eights
and that was a deal.
Also, the market is only going to go up, in my opinion, and the inventory
for buyers is low right now, but I believe it will improve, especially next spring when Sellers realize that they can now
sell their properties. There will still be a number of homes that are in the foreclosure market that are going to be released
by banks as well.
Don't wait! Think about buying now if you're in the market.