Archive for the ‘Guidelines/Compliance’ Category
After the bubble burst on subprime loans in the wake of the mortgage meltdown of late 2007, loans backed by the Federal Housing Administration (FHA) became the de facto “go-to” instrument for anybody seeking to secure a mortgage with a low down payment and/or less than stellar credit. However, being the “low-down-payment-imperfect-credit-go-to-lender” comes with a price…sometimes a steep one.
Facing rising defaults and a battered balance sheet, FHA has announced sweeping changes and stricter guidelines. In a nutshell, borrowers will have to bring more money to the table, and have better credit scores in order to qualify.
Overall there are four major changes to keep an eye out for:
UP-FRONT MORTGAGE INSURANCE
The Up Front Mortgage Insurance premium is being increased from 1.75 percent to 2.25 percent. Up Front MIP is paid on every FHA transaction, and is normally rolled into the overall loan amount – on a $200,000 loan with 3.5% minimum down payment, the increase results in almost $1,000 being added to the loan amount.
FICO/DOWN PAYMENT
Borrowers with FICO scores less than 580 will see their down payment requirement jump from 3.5% to 10%. However, many banks won’t approve an FHA loan with a FICO less than 620 (some even 640), so in many cases this change won’t apply.
Continue reading the rest of this article…
The Good, the Bad and The Ugly…what you need to know about the new Good Faith Estimate
The new Good Faith Estimate hit the lending scene Jan 1st, and the response has been all over the map. Some lenders are welcoming the change, while others are screaming Armageddon. Those reactions notwithstanding, what does this all mean for the lending industry, consumers, and Real Estate?
First off, the new Good Faith Estimate (sometimes called “GFE 2010” – download here) was implemented to yield a little transparency to the industry (fee-wise) and to help consumers compare lenders and loan programs on an apples-to-apples basis (again, fee-wise). The GFE is a detailed list of all the charges associated with a loan transaction, and is one of the main areas that came under fire in the wake of the “mortgage meltdown.” GFEs used to vary wildly from lender to lender, and the ability to hide fees made the “apples-to-apples” comparison a nightmare for consumers. GFE 2010 aims to fix that.
Does it fix the problem or add to the confusion? Let’s break this down Good/Bad/Ugly style.
The Good
The new GFE really does add some transparency to the fee disclosure involved in a transaction. It especially helps the loan officer explain certain aspects of the loan (escrow accounts, service providers, lock periods) that can sometimes elude even the most experienced borrower. It also does a good job of breaking down lending fees and settlement fees, which were a bit tough for consumers to follow on the original form.
Continue reading the rest of this article…