With the presidential elections now a week behind us, the public has held high expectations for president-elect Barack Obama. And given the current economy, it’s fair to assume that he has quite a tall order ahead of him. Today, Obama visited the White House and also met with President Bush to begin the highly anticipated transition of leadership. 

With a new presidency in line, I wanted to point out a few mortgage and FHA related items that we might all expect to see in the near future. First of all, with the most recent CNN polls showing a 76 percent disapproval rating of President Bush, it may seem hard for president-elect Obama to disappoint. But, let’s not forget the severity of the current economy we face, with the housing sector as no exception. With that in mind, here are a few key issues that have been recently addressed by Obama: 

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When HUD issued a letter back in April regarding non-traditional credit evaluation, we covered the basics and explained how it was a great solution for many individuals. Today, I wanted to revisit this topic and remind individuals how it applies to our current credit market. Unless you’ve been living under a rock the past year or so, you know that the credit markets are suffering and are responding by tightening up their loan guidelines. 

FHA loans have since filled the void recently, but FHA approved lenders have shown they are just as susceptible to the markets. Specifically, in terms of considering non-traditional credit evaluations, some lenders have either fled away entirely from no credit borrowers or have implemented various pricing hits for these types of loans.  More importantly, these reactions remind us of two key FHA fundamentals and how the FHA operates. 

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The new FHA mortgage limits for 2009 have been announced by HUD.

Actually there are three sets of limits, a limit for homes in lower cost areas (the “floor”), limits in “higher-cost” areas and limits for areas outside the continental United States: The limits look like this:
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The Mortgage Bankers Association is reporting a huge increase in FHA market share.

The Association says “the government share of originations more than doubled to 11.8 percent in the first half of 2008 compared to 5.7 percent in the second half of 2007. The government loans category includes loans guaranteed or insured by the Department of Veterans Affairs, the Federal Housing Administration and Rural Housing Service. The increase in the FHA loan limit, which broadened FHA financing for more borrowers, was one of the factors that contributed to the increased popularity of the FHA.”

The increase in federally-insured loan programs should hardly come as a surprise. The subprime, Alt-A and even the prime market have been impacted by the liquidity crisis, the failure of many lenders and the termination of many so-called “affordability” mortgage programs.
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With downpayment assistance programs (DPAs) now banned from use with FHA mortgages the question arises as to whether there is any replacement for such help.

One idea which has been suggested is the use of a silent second. In basic terms, the borrower gets a loan for some or all of the down payment. There is no monthly cost for the loan, instead the loan is forgiven if the borrower stays in the property for seven years. Also, if half the second is paid back within 18 months the other half is forgiven.
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During the mortgage process, many individuals often struggle to get past the approval process for various reasons. Especially during this credit crisis that we are experiencing, getting a loan approval can be quite difficult nowadays.  You read about it, you hear about it, and you see it on TV - but when you get denied a loan approval, it gets personal. The common response would be to reevaluate your application and simply ask “Why wasn’t I approved?”

Fortunately, one of the beauties of an FHA loan is the process of manual underwriting and compensating factors. For potential borrowers and those interested in FHA home loans, understanding how compensating factors work will give you the edge you need if your loan is on the borderline of an approval or denial.

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In case anyone has not noticed, we have a huge foreclosure problem. Hundreds of thousands of people each month are receiving foreclosure notices, a matter which you might think would interest the real estate wing of the federal government, the Department of Housing and Urban Development.

Alas, we are wrong.

The latest numbers from HUD are stunning: For the first 15 days of October just 49 borrowers with delinquent conventional loans were able to refinance with FHA mortgages. That’s less than one per state.

This is a disgrace — but it gets worse.
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Mortgage Data Web is a powerful data sourcing company for mortgage origination market share and lender rankings. In one of their FHA reports from January 2008 to September 2008, you can visually see some of the trends we’ve been pointing out here on FHALoanPros recently. 

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