Peter G. Miller
June 20th, 2011
The FHA loan limit will fall as of Oct. 1, 2011, an event which has set off concerns that Federal Housing Authority (FHA) mortgages will be unavailable to lots of borrowers.
Down and out for high loan limits
Such worries are grossly overblown. Here’s why:
The FHA loan limits–as well as conventional loan limits–were increased on a “temporary” basis in 2008. Under the new rules the top FHA and conventional loan limits were the same–$729,750. Also, the FHA loan limit in most areas in the contiguous 48 states was set at 125 percent of the median house price. (There were higher FHA loan limits in Alaska, Guam, Hawaii, and the Virgin Islands and the reverse mortgage limit was $625,500.)
You can see how the 2008 standards caused problems.
First, if the FHA and conventional loan limits are the same in high cost areas it means that loan products could be compared straight up without an artificial limit as to the size of FHA mortgages. In other words, there could be open competition for borrowers.
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Peter G. Miller
June 15th, 2011
There is a serious movement on Capitol Hill to raise the Federal Housing Authority (FHA) downpayment to 5 percent. Now some might think, “Aha, this is a good idea because it will make the FHA mortgage program more secure.” The catch is that if you look at the pros and cons it quickly becomes apparent that the pros are nonexistent.
Cons of increasing FHA downpayments
“NAR strongly opposes increasing the downpayment for FHA,” says Ron Phipps, president of the National Association of Realtors. “The correlation between downpayment and loan performance is significantly less important than the linkage to strong underwriting, which FHA continues to have. FHA’s foreclosure rate remains less than conventional mortgages, so we don’t believe changes to the downpayment would do anything but disenfranchise many creditworthy homebuyers.”
HUD, itself, has said that an increase in the required downpayment would do just about nothing to improve the FHA mortgage program–and a lot to hurt it.
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Peter G. Miller
June 10th, 2011
Housing and Urban Development (HUD) is now involved in several situations where it claims that pregnant borrowers were denied housing under the Fair Housing Act. This is important because such decisions can impact individuals who are now or might become pregnant, as well as their families and household members.
The Fair Housing Act and pregnancy
In basic terms, the Fair Housing Act says that individuals may not be denied a home, rental or mortgage because of their race, color, national origin, religion, sex, familial status or handicap. Additional laws at the federal and state level can protect against discrimination on the basis of other factors such as age and sexual orientation.
Within the meaning of familial status, says John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity, “pregnancy is not a basis to deny or delay a loan. It’s just that simple. Mortgage professionals may verify income and other resources and have eligibility standards but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for.”
The policy would also apply to men who are on parental leave due to the birth or adoption of a child, says HUD.
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Peter G. Miller
June 6th, 2011
There’s a lot of rumbling in Washington suggesting that an effort is now underway to raise the Federal Housing Authority (FHA) down payment requirement from 3.5 percent to 5 percent.
This is an inherently bad idea–and not unexpected.
Will your FHA mortgage cost you more?
“Research has shown that requiring a higher down payment does little to reduce risk of default but causes home buyers to use more of their reserves for the down payment,” said Barry Rutenberg, speaking for the National Association of Home Builders. “Sound underwriting is the key to minimizing foreclosures and defaults, not higher down payments. This is demonstrated by current FHA foreclosure reports on loans made to borrowers with sound credit profiles, which have significantly improved.”
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Peter G. Miller
June 2nd, 2011
In the game of scoring political points one need look no further than a new report issued by the Congressional Budget Office (CBO) to see theory differ from reality. According to Accounting for FHA’s Single-Family Mortgage Insurance Program on a Fair-Value Basis, the Federal Housing Authority (FHA) could be a big cost to the government.
FHA’s real cost
This, in fact, is not the case. It could be the case if we use an absurd form of accounting. In other words, elephants can’t fly but if we change physics enough than in theory that would be a real worry.
“The costs of FHA’s single-family mortgage insurance program are recorded in the federal budget using a methodology spelled out in the Federal Credit Reform Act of 1990 (FCRA),” says the CBO. “This analysis examines the budgetary impact of using a different accounting approach–fair-value estimating–which provides a more comprehensive measure of the cost of that program.”
So what’s the difference? There are several points:
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