It must have seemed like a good idea at the time, an effort by HUD to help underwater homeowners. But between September and the end of November the FHA short refinance program has generated just 61 applications and a single approval.

You can’t begin to imagine that such inactivity is the by-product of public disinterest. Hordes of people would like to refinance to a new FHA home loan at today’s interest rates. And while they may have the income and credit the hurdle which cannot be breached is a lack of equity to justify the loan, a hurdle the FHA short refinance program was designed to topple.

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens back in August. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

So what happened?

You have to give HUD credit for at least making an effort to help underwater borrowers. But despite good intentions, you could see this program would go nowhere from day one. read more

A study of FHA mortgage closing costs turned up some interesting data that probably prompted some of the reforms we will see in the coming months.  Here is a quick rundown of what you will and will not have to worry about when shopping for an FHA mortgage next year.

Not to worry: How you pay your closing costs

In the past, HOW you paid for your closing costs influenced how much you paid.  A review of HUD data indicated that when borrowers got their closing costs paid by their sellers or through brokers’ yield spread premiums, they received less benefit than expected. For example, you’d expect that a seller contribution of $1,000 would reduce what you pay for your financing by $1,000. But what really happened was that costs to borrowers were only reduced by about $500 for every $1,000 spent by sellers. Borrowers whose fees were offset by yield spread premiums (commissions paid to brokers by wholesale lenders) only got about $200 in savings for every $1,000 in YSP paid to their brokers. And what about those who chose to pay discount points to get lower mortgage rates? They only received about $200 in benefits for every $1,000 in points paid.

The take-away: Today, lenders must earn the same amount for your mortgage no matter how it is paid for.

You still have a choice of paying discount points for a lower mortgage rate, or paying a higher rate  in exchange for the lender absorbing your mortgage costs. And you will pay more interest over the life of your loan if you finance your FHA mortgage insurance premium and / or refinance costs than if you pay them in cash. But you will get pretty much the same deal from your lender no matter how you pay your loan fees. read more

Experienced real estate investors have a favorite adage: “You don’t make money on real estate when you sell, you make it when you buy!” How does that work? It’s simple, really. Buyers in general are in a more powerful position than sellers are, and that goes double in today’s market.  So if you are in the market for property,  you will never be in a better position to make some money by paying less. And there is almost no better way to pay less than purchasing a HUD home at a discount and financing at today’s mortgage rates.

HUD homes at a discount

HUD homes are foreclosure properties that were financed with FHA mortgages. HUD Homes are listed online and can be viewed at http://www.hud.gov/homes/homesforsale.cfm. Or just contact a local real estate agent or HUD’s Management and Marketing Contractor in your state. It is not uncommon for HUD homes to be priced substantially lower than comparable properties not in foreclosure.

Your real estate agent must submit your bid for you. Normally, HUD Homes are sold in an “Offer Period.” At the end of the Offer Period, all offers are opened and, basically, the highest reasonable bid is accepted. If the home isn’t sold in the initial Offer Period, you can submit a bid until the home is sold.

A home for $100? Really?!

Well, kinda sorta. Teachers, nurses, and first responder can purchase HUD homes in revitalization areas for half price and with as little as $100 down  through HUD’s Good Neighbor Next Door program.  A three-year occupancy is required, which just means that you agree to live in the home (and nowhere else) for three full years and all that lovely equity is yours!

Financing HUD homes

HUD Homes can be financed in a variety of ways. In many cases you can finance them with a new FHA home loan.  How a HUD home is listed determines which FHA-insured financing program applies. Properties that do not require significant repairs can be purchased with an FHA-insured mortgage. The property listing will indicate if it is eligible for purchase with an FHA-insured mortgage. If the property is pretty trashed you may need an FHA rehab loan to finance the purchase and necessary improvements.

There are also many local and State government programs available that provide grants for the downpayment or to help pay closing costs. To find out what programs are available in your area visit http://www.hud.gov/buying/localbuying.cfm.

The debate concerning FHA credit scores and the possibility of discrimination has begun to expand.

The matter got started with a report from the National Community Reinvestment Coalition which alleges that lenders have engaged in discriminatory practices. How?

“Many of the country’s largest financial institutions,” alleges the study, “are refusing to lend under the FHA loan program to consumers with credit scores between 580 and 640, despite the fact that FHA policy establishes a 100% guarantee for refinance and home purchase loans to a credit score of 580 for borrowers with a 3.5% downpayment.”

Specifically, a check of 50 lenders allegedly found that “44 did not lend at a 580 credit score. Thirty two lenders, or 65 percent, refused to lend to consumers with credit scores below 620. An additional 11 lenders, or 22 percent, refused to extend credit to consumers with credit scores below 640. One lender refused to lend to consumers with credit scores below 600. Only 5 lenders, or 10 percent, had policies in place that served the needs of consumers with credit scores between 580 and 620, in accordance with FHA policy and in compliance with fair lending laws.”

“This decision is arbitrary,” says John Taylor, president & CEO of the National Community Reinvestment Coalition, “because the loans are 100% guaranteed, whether the borrower’s credit score is 580 or 780. That means the loans with lower credit scores don’t pose additional risk to the company, so there’s no legitimate business defense for this across-the-board practice.”

In other words, the FHA has made a decision to insure borrowers with 580 credit scores and 3.5% down. It may not be a great decision in terms of risk, it might be changed, but for now the FHA is putting its money where its FHA guidelines are: a lender who properly makes an FHA loan is fully guaranteed against loss if the mortgage is foreclosed.

Cause and Effect

But aren’t lenders thrown out of the FHA program because of “excess default levels” and, therefore, shouldn’t FHA lenders be allowed to raise credit score levels to a point they find comfortable to protect their interests?

Not quite. An FHA lender in Nevada who plays by the rules is likely to have a higher default rate than a lender in South Dakota simply because of local economic factors. The FHA knows that credit scores and default rates don’t tell the whole story.

“We know that lower credit scores, in and of themselves, indicate a higher risk of default,” says FHA Commissioner David H. Stevens. “But, as we have discussed with industry stakeholders for months, borrowers with the same credit scores can pose very different risks. For instance, a habitual late payer is likely to pose a different risk than someone who lost his or her job but otherwise has a history of paying their bills on time. It has been well documented that homeownership produces better outcomes for health, education, and long term wealth. Denying responsible families the opportunity to own a home based solely on their credit score is in no one’s best interest and may have a disparate impact on many.”

Given that the mortgage mess is now better than three years old you might expect that FHA loan activity might begin to slow and represent less market share. In fact — and oddly — that is not the case according to a new report from HUD.

Some of the numbers reported by HUD include:

___ For home purchase loans, the FHA’s share of the number of new mortgage
loans was 42.3 percent, up from 33.7 percent from the previous quarter and 28.6 percent a year earlier.

___The FHA’s dollar volume share of the mortgage market was 18.9 percent, up
from 16.2 percent in the first quarter and 16.8 percent a year earlier.

___ For home purchase loans, the FHA’s dollar volume share was 36.3 percent, up from 29.2 percent in first quarter and 24.5 percent a year earlier.

___ Based on the number of loans originated, the FHA’s share of the mortgage market was 22.7 percent, up from 19.2 percent in the previous quarter and
19.5 percent a year earlier.

Huh? How can this be?

There’s a “lagging indicator” in here and it has nothing to down with FHA guidelines, interest rates or prepayment penalties. read more

A few months ago I wrote a post advising consumers to compare the Fannie Mae Flex 97 percent loan with FHA’s product because in many cases it was the better deal, especially once FHA increased its mortgage insurance premiums. Today, however, Fannie Mae no longer supports the Flex 97 product. Instead, they will offer a standard mortgage at 97 percent loan-to-value with all the loan level pricing adjustments they can slap on a mortgage.

Fannie / Freddie 97 percent versus FHA

The credit score minimum for FHA loans with 3.5 percent down is 580, with many lenders imposing a 620 or 640 score.  Fannie Mae requires a minimum credit score of 620 for loans with loans exceeding 95 percent of the property value and imposes a 3 percent surcharge for credit scores of less than 640. In addition, those applying for these mortgages must be able to get approved for mortgage insurance. Genworth, one of the larger mortgage insurers out there, won’t consider insuring a mortgage over 95 percent loan-to-value if your credit score is less than 720 and it won’t insure mortgages high-LTV loans in AZ, CA, FL and NV under any circumstances.

Fannie has made one positive change, however — it does allow you to use gift funds as your entire down payment. It has also changed its underwriting to put more emphasis on income and less on assets, so in some cases you may be able to get approved for a Fannie Mae loan more easily than an FHA mortgage and vice versa. In general, however, FHA financing is both easier to secure and less costly.

Compare options

Recent studies from several sources have discovered that the majority of applicants looking for mortgages don’t shop as much as they should (over half did not shop AT ALL!). And getting the lowest rate is not your only consideration. When shopping for a home loan, compare several programs, including FHA and conventional offerings before deciding on your program. Differences in mortgage insurance premiums can really affect the cost of your loan.

Infighting between the Federal Housing Finance Agency (FHFA) and FHA could keep the FHA short refinance program from assisting homeowners with mortgage amounts exceeding the current value of their homes. CNBC reports that an inherent conflict of interest between rescuing underwater homeowners through the FHA short refinance program and the FHFA’s mission to protect taxpayers from losses while Fannie Mae and Freddie Mac are under its conservatorship. Fannie and Freddie own a majority of home loans in the US, and their participation in the FHA short refinance program would require their agreement to reduce mortgage balances for short refinance transactions by at least 10 percent. Yes, this would create losses for the two major investors in mortgage loans, but let’s consider the alternatives, which include: read more

Recently, the National Community Reinvestment Coalition asked HUD to investigate 22 lenders that impose stricter underwriting criteria than required by FHA to insure mortgages, claiming that requiring higher credit scores discriminates against minority mortgage applicants.  Current FHA guidelines allow mortgages to borrowers with credit scores above 580 with down payments equaling 3.5 percent of the loan amount, or above 500 with a 10 percent down payment.

Not easy finding FHA loans with 580 credit score

The NCRC conducted its own survey and found that 65 percent of lenders refused to consider consumers with credit scores below 620 for FHA financing and that 22 percent refused to extend credit to consumers with credit scores below 640. Only five lenders surveyed had policies in place that allowed lending to applicants with credit scores of 580 and higher.

But is this discriminatory? Some argue that it is because minorities as a group possess lower average credit scores than white borrowers. But others say that by itself this fact does not indicate that the credit scoring system is discriminatory. If low credit scores correlate to higher risk of mortgage default, then they can be considered predictive and are allowed to be used as a condition of loan approval.

Study finds that credit scores do in fact predict mortgage default

A study conducted by the Federal Reserve Bank of Cleveland concluded that lower credit scores do in fact indicate higher likelihood of mortgage default. In addition, the direction that the scores were taking (improving or worsening) was highly predictive of mortgage default. Similarly, insurers continue to be allowed to use credit scoring in setting rates despite the fact that this practice results in minorities paying more on average for insurance than whites do. That’s because of studies like one conducted by the Texas Department of Insurance, which found the average loss per vehicle for people with bad credit scores was double that of people with very good scores. Additionally, the department found that people with the best scores had 40 percent fewer accidents and that claims by those with poor scores were three times higher. Because credit scores have been found to predict insurance company costs, they continue to be used to set rates.

Back to FHA and credit limits

Mortgage lenders do face consequences even if they are insured by FHA. First, if they are brokers, the lenders that they sell loans to could pull the plug and stop buying their loans. If they are direct lenders, excess default experience could cause them to lose their FHA approval and cut off a large chunk of business. The easiest way for lenders to protect themselves is to impose higher credit score requirements on their applicants. And as long as they impose the same credit limits on everyone regardless of race, it’s hard to see how HUD will consider this discriminatory.

Starting January 1st the process of getting an FHA loan is scheduled to change, but will there be much practical difference for borrowers?

It was back in April that the FHA announced a serious challenge to the lending industry: In basic terms the idea is that lenders will have more responsibility for the independent mortgage brokers who bring them loans.

The FHA explained the changes this way:

First, “FHA-approved lenders currently assume liability for all the loans they originate and/or underwrite,” said HUD. “While mortgage brokers will continue to be able to originate FHA-insured loans through their relationships with approved lenders, they will no longer receive independent FHA eligibility approval. These changes align FHA with Fannie Mae and Freddie Mac and have potential to increase the number of mortgage brokers eligible to originate FHA-insured loans while providing for more effective oversight of brokers by FHA-approved lenders.”

Translation: Well, yes, more mortgage brokers will be able to sell FHA loans but only IF a lender is willing to accept their loan packages. In practice, you can imagine that a lot of lenders will want to dump independent mortgage brokers to bring the business in-house.

Second, “mortgage brokers or other third-party originators, already approved by FHA, will be authorized to continue to originate FHA-insured loans through the end of the calendar year without sponsorship of an FHA-approved lender. Commencing January 1, 2011, however, the origination authority will end.”

Translation: If you’re a mortgage broker you better find lenders to buy your mortgages because the FHA will not longer insure them directly.

Lender Responsibility

You can pretty much see what’s going on here. The government wants to reduce risk so it has stiffened FHA guidelines during the past two years and changed the insurance premium scheme. At the same time it dumped large numbers of loan sellers who were not meeting its standards and shifted more responsibility to mortgage originators.

In practical terms borrowers might see a few changes. read more

FHA Commissioner David Stevens has characterized the FHA short refinance program as the “single most effective way” to assist homeowners owing more on their mortgages than their homes are worth, but mortgage lenders are lagging in their participation. Why, when mortgage companies risk losing even more when they foreclose mortgage loans and get stuck with repairing, maintaining and selling foreclosed homes? Although this makes no sense to anxious homeowners who cannot sell or refinance to today’s low mortgage rates through no fault of their own, the complexities of the mortgage industry often get in the way of  common sense.  Here’s why:

FHA short refinance: Why so little response?

Gone are the days when you could take out a mortgage loan from your local bank and deal with the same banker for as long as you had the mortgage loan. Mortgage loans are now packaged and sold to investors including Fannie Mae and Freddie Mac, and other investors, which may include pension funds, mutual funds, and others. Most homeowners never have a problem with this process until they need help from their mortgage company. The entity that owns your mortgage is not the same as the mortgage servicing company that collects payments, pays your property taxes and insurance, and assists with any business related to your home loan. Although the first line of communication, the mortgage servicing company must follow guidelines established by the actual owner(s) of your mortgage loan.

Mortgage investors buy mortgage loans based on sepcific mortgage loan balances and interest rates. The investor expects a return on investment based on these amounts. Loans may be sold individually or in blocks  called mortgage backed securities (MBS).  MBS consist of loans with the same mortgage rates and maturity dates. Changing the terms of MBS mortgage loans skews the amounts and potential yields for investors in MBS.  Mortgage servicing companies can remove defaulted loans from MBS, but in general, this cannot occur until a mortgage loan is seriously delinquent. Understandably, homeowners who are current with their mortgage payments are unwilling to let their loans go delinquent without any guarantee that an FHA short refinance  will be approved or completed.

Mortgage industry complexities compromise relief efforts

These issues and others tie the hands of mortgage servicing companies dealing with customer requests for assistance. In addition to following FHA and investor requirements, private mortgage insurance (PMI) companies must also approve any changes to mortgage loans that they insure.  Multiple approval requirements and timeliness is exasperating for homeowners, costly to mortgage investors, and amounts to insanity for mortgage servicing pros who must coordinate between the regulations and priorities of FHA, mortgage investors, PMI companies, and homeowners. Given the extraordinary nature of current housing markets and the depleted economy, it seems that some day, some how, all of the players must coordinate toward preventing  foreclosures, promoting home sales, and assisting homeowners struggling with keeping, selling, or refinancing their homes.

Government attorneys in New York have filed a “civil fraud lawsuit against 14 defendants — including sellers, lenders, and appraisers — alleged to have engaged in an elaborate conspiracy to commit mortgage fraud in New York City that caused at least 17 home buyers to default on their mortgages and face foreclosure.”

The government alleges that 17 homes were bought “and promptly re-sold, or ‘flipped,’ them ­without substantial improvement — to inexperienced, low-income buyers, duping them into buying properties they could not afford at falsely inflated prices. The appraiser defendants then fraudulently overstated the value of these homes in their appraisal reports so that the buyers would take out home mortgage loans far in excess of the property’s true value.”

So where do FHA loans come in?

“All 17 loans, which were insured by the U.S. Department of Housing and Urban Development (“HUD”), defaulted, often within just a few months after the closing, exposing HUD to millions of dollars in losses. In addition to the losses to HUD, the fraud also left the buyers facing foreclosure and eviction from their homes.”

I bring up these allegations for several reasons.

First, it’s not a crime to buy and quickly re-sell real estate, any more than it’s a crime to buy and sell stock with minutes.

Second, it’s not a crime to sell property to “to inexperienced, low-income buyers.” That’s an expression that could define much of the first-time buyer market. All first-time buyers can be defined as “inexperienced” and “low income” does not mean “low credit.” Hopefully purchaser inexperience will be offset with the use of buyer brokers and surely there should be FHA loans for people with bad credit and limited income (or, at least credit which is less than sterling).

The government’s complaint is only an allegation, no one has been convicted of anything. It claims that an effort was made to materially inflate values when seeking a mortgage so that the lender would not know the true worth of the property. In this case the government alleges that “the mortgage fraud conspiracy included the participation of several appraisers who allegedly submitted false appraisal reports that ‘hit the numbers.’”

There is much written about “illegal flipping” with the result that honest rehabbers who fix-up and restore properties are often seen as somehow shady. The real problem is not that homes can be quickly repaired by skilled and well-equipped professionals, rather the issue is that mortgage fraud creates additional risk for FHA lenders and thus FHA insurance and today’s FHA premium rates.

For several years FHA loan guidelines prohibited the use of FHA-insured financing when a property had been re-sold during the past 90 days. In January the FHA suspended the rule until February 1, 2011. It is unknown whether HUD will bring back the rule in February, continue the suspension or modify the guidelines.

HUD has every right to hold down the risks which result from mortgage fraud. But quickly buying and selling property is not by itself evidence of improper activity. My hope is that HUD will either continue the rule suspension announced last January or opt for a an alternative such a requirement that when someone quickly buys and sells they must show the lender the appraisal and photographs from when was bought to compare with a new appraisal and pictures. A requirement to produce repair bills and cancelled checks hardly seems unfair. In addition, lenders should be required to use different appraisers for each valuation.

FHA’s Short Refinance program has gotten off to a very slow start (since the program’s inception in September, a whopping THREE of these loans have closed), largely because mortgage giants Fannie Mae and Freddie Mac have refused to go along with the program. But wait, you say, if the government wants this program to happen, and Fannie and Freddie are under government control, can’t the administration just force them to go along? Unfortunately, it’s not that easy.

What is the program good for?

Federal officials estimate that 500,000 to 1.5 million homeowners could benefit from the program(about 23% of all mortgage borrowers). The backbone of the Short Refinance program is that it requires the reduction of the loan’s principal balance to no more than 97.75% of the home’s value. So the current lender must be willing to strip the loan down and write off the excess before it can be refinanced into a new FHA mortgage. And unlike HAMP applicants, who have to be at risk of imminent default to get approved for their modifications and who are often behind on their payments, FHA Short Refi candidates must be current on their mortgages and their credit must be good enough to meet FHA guidelines. So the program basically asks lenders to take loans that are performing just fine and get rid of them and take a loss as well. Small wonder there is no lender enthusiasm for this program.

But can’t the government force Fannie and Freddie to participate, since it’s in the best interest of the economy and the homeowner’s involved? While FHA leaders and the Obama administration would like to force the GSEs to show their borrowers a little love, a Washington Post article says that other agency folks aren’t so sure about that. The  Federal Housing Finance Agency, which has overseen Fannie and Freddie since their government takeover in 2008,  has concerns that forcing the GSEs to get with  the program could cost taxpayers too much. FHFA is independent of the Obama administration and is charged with minimizing GSE losses.  The companies have already cost taxpayers more than $130 billion.  So when you are pitting the interests of taxpayers against that of some homeowners (who are also taxpayers) it gets less cut-and-dried.

Sen. Richard C. Shelby (Ala.), the top Republican on the Senate banking committee, expressed concern that all taxpayers, including the millions who rent, would be subsidizing those who bought homes in certain parts of the country, or even those who took out second mortgages to buy boats and fund vacations. “While underwater homeowners could benefit from principal write-downs, financing the write-downs through additional losses imposed on taxpayers amounts to a redistribution from taxpayers in general to certain classes of homeowners,” Shelby said.

As Oscar Wilde said, the truth is rarely pure and never simple.

Last Wednesday, approximately 25,000 condominium associations missed their deadline to get their paperwork in to retain their eligibility for FHA financing. This means that unsuspecting owners of units may find themselves unable to refinance them or sell them to people who want / need FHA financing. The effect of this could be devastating in some housing markets when you consider that:

1. First-time home buyers are more likely than established homeowners to purchase condominium units.

2. First-time home buyers are much more likely to want / need FHA financing.

3. FHA no longer offers “spot” approvals of individual units. Therefore, owners are much more dependent on their HOAs to keep the paperwork filed and retain or obtain FHA approval.

FHA did extend the deadline to take care of eligibility requirements, but about 2,200 associations were only granted an extension to December 31, just a couple of weeks away. If yours is one of those, you might want to lean on your HOA because even if you aren’t trying to sell or refinance your unit, failure to secure FHA approval could make it harder for others to sell and thus lower your own property value.

“The extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions,”  FHA said in a letter.

The new deadlines are as follows:

• Projects approved between 1972 and 1985 must be recertified by Dec. 31.

• Projects approved between 1986 and 1990 must be recertified by May 31, 2011.

• Project approved between 1991 and 1995 must be recertified by July 31, 2011.

• Projects approved between 1996 and 2000 must be recertified by Aug. 31, 2011.

• Projects approved between 2001 and 2005 must be recertified by Sept. 30, 2011.

• Projects approved between 2006 and September of 2008 must be recertified by March 31, 2011.

The FHA insures mortgages on over 40,000 condo projects, 25,000 of need to be recertified. What could derail your project’s recertification? According to FHA:

Condominium Project approvals will expire two years from the date it has been placed on the list of approved condominiums.  This will also apply to all projects currently on the list of approved condominiums.  Further participation in the program after this two-year period has expired will require recertification to determine that the project is still in compliance with HUD’s owner-occupancy requirement and that no conditions currently exist which would present an unacceptable risk to FHA.  Items that should be given consideration are:

1.      Pending special assessments,

2.      Pending legal action against the condominium association, or its officers or directors,

3.      Hazard, liability insurance and when applicable flood insurance.

The Department of Justice (DOJ) has announced a settlement resolving alleged lending discrimination by a major FHA lender. In its announcement, the DOJ notes that a prominent FHA lender is agreeing to pay $2 million to settle allegations that it engaged in a pattern or practice of discrimination against African-American borrowers between 2006 and 2009. In the wake of recent discussions of the practice known as “investor overlay,” where FHA lenders increase minimum requirements for credit scores on FHA loans, this news highlights further concerns about FHA loan underwriting requirements and how (or if) its guidelines can be uniformly enforced without causing liability risk to FHA lenders.

FHA approved lenders need protection against FHA penalties, sanctions

Until recently, FHA did not require a minimum credit score for qualifying potential borrowers for FHA loans. The agency has recently implemented a minimum FICO credit score of 500, which is relatively ineffective as the average FICO credit score for FHA borrowers is approximately 620. How can lenders follow FHA guidelines, while avoiding problems with FHA when FHA loans go south? Although the considerations and arguments are many, it could be helpful for lenders if FHA accepted more responsibility by establishing and enforcing specific requirements designed to protect FHA lenders and FHA from making loans to those who are incapable of making mortgage payments over the long term.

FHA guidelines: Economic conditions call for considering more than credit scores

Raising the minimum required credit scores may be a solution for reducing underwriting risks, but even some of the most qualified consumers have seen their credit scores tank as the result of long term unemployment, foreclosure, and mortgage defaults stemming from their inability to sell homes worth less than the mortgage amounts they owe. Underwriting to a specific credit score seems unfair if borrowers can prove that one event beyond their control caused their credit scores to fall.

Meanwhile, FHA lenders do their best to interpret FHA guidelines while guarding against FHA scrutiny arising from FHA auditors finding errors and inconsistencies with lender loan underwriting or servicing processes for failed loans.

Although imposing concrete requirements for FHA lenders may provide an easy solution, would it work? FHA currently allows lenders some leeway in interpreting its underwriting criteria, and allows prospective borrowers flexible means of proving their creditworthiness. If these policies were to change, it’s likely that fewer borrowers depending on FHA loans would be approved for home loans and refinance mortgages. Should FHA decide to implement stricter and less flexible loan approval guidelines, it would remove some of the burden from FHA lenders who’ve been making their best interpretations of the agency’s ambiguous loan requirements.

It’s been an interesting few days on the mortgage front. Mortgage rates, according to Freddie Mac, have risen roughly half a percent during the past month or so. No less remarkable, it’s possible that rates will continue to rise.

The specifics look like this: Freddie Mac reports that the interest cost of a 30-year fixed-rate mortgage reached 4.61 percent for the week of December 9th.

“Interest rates for 30-year fixed mortgages are now almost a half percentage point higher than the record low set in mid-November,” says Frank Nothaft, Freddie Mac’s chief economist, Freddie Mac, “which for a $200,000 conventional loan amounts to $50 more in monthly payments.”

Get it? Rates are up half a percent but the actual cost increase is about $12.50 a week for a $200,000 loan.

In fact, today’s interest rates are read more