The Treasury and the Feds are putting their heads together to see what they can do to move this organization right along. They are trying to write some tough rules, and the sole purpose of the rules is to make things better and prevent another financial crisis from happening; like the one we have now. The bigger question is, who is going to write the rules? Apparently, word has it that the Federal Reserve may be the one to have the final say on it all.
If the Consumer Protection Bureau does give some headship to the Federal Reserve then they will be just fine in doing what they set out to do. So many critics have questioned the bureau’s rule making ability, and with all the problems in our economy it is no surprise that anyone would question it. In the long run, everyone wants to know what type of experience these people are required to have in order to be in a leadership position.
-Mayer Dallal
Sunday, October 31, 2010
A New Credit Score?
There is a new credit score available to you and it’s custom made just for your mortgage. That is right! The new FICO 8 is on the horizon, and it only pertains to how you pay your mortgage loan.
FICO is the leader is credit management technology, and services hundreds of thousands of companies. The three main credit agencies use it, and it’s available to anyone. What does this do? The reason for this is to allow banks to get a view that is geared to the real estate market, and will enable us to get some stability as a country in our markets. Overall, this is very beneficial and will reduce the risk for everyone.
The idea behind the score was also to help lenders predict how a mortgage would perform, and to help them fine tune their credit decisions based on what they can see, which will give them a good idea of what they think will happen. All lenders and services will have access to it, so there should be no surprises.
-Mayer Dallal
FICO is the leader is credit management technology, and services hundreds of thousands of companies. The three main credit agencies use it, and it’s available to anyone. What does this do? The reason for this is to allow banks to get a view that is geared to the real estate market, and will enable us to get some stability as a country in our markets. Overall, this is very beneficial and will reduce the risk for everyone.
The idea behind the score was also to help lenders predict how a mortgage would perform, and to help them fine tune their credit decisions based on what they can see, which will give them a good idea of what they think will happen. All lenders and services will have access to it, so there should be no surprises.
-Mayer Dallal
Does the Government Pay to Prevent a Foreclosure?
In the midst of all the foreclosures there have been nearly half a million loan modifications done. The success is right around 40%, which is good although we would really like to see it get higher. The only way it would get higher is if banks aggressively solicited modifications instead of waiting for borrowers to get to them. It seems that the families are having to make the first move these days, no matter how deep in they are in the loan.
It has been said that the average cost per modification is a little over $50k. Where does this figure come from? The figure is simply a part of what goes into doing a mortgage modification, and includes everything from the people hired to do the job, to the filing of paperwork, the fees that the bank would eat and some other miscellaneous costs. It sounds like a lot per loan, but let’s face it, we can’t have families put out on the street. The families should have gotten help extended to them in the first place, but there was no real solution in place. Ever see the movie “It’s a Wonderful Life”? That says it all.
-Mayer Dallal
It has been said that the average cost per modification is a little over $50k. Where does this figure come from? The figure is simply a part of what goes into doing a mortgage modification, and includes everything from the people hired to do the job, to the filing of paperwork, the fees that the bank would eat and some other miscellaneous costs. It sounds like a lot per loan, but let’s face it, we can’t have families put out on the street. The families should have gotten help extended to them in the first place, but there was no real solution in place. Ever see the movie “It’s a Wonderful Life”? That says it all.
-Mayer Dallal
What's The Risk?
Is it just me, or does anyone else not see potential issue with having a robot sign foreclosure documents? I think that all the banks and lenders need to be taking a closer look at their process and who is overseeing these things. While it is hard to manage everyone in a large organization, it is imperative that a large organization knows how to make it run like a well-oiled machine.
Having the proper supervisory people in place makes the world go round and having employees that contribute make it all worthwhile and a lot easier to endure. I will say that most companies have it all wrong, and want to get the best around for the least amount of money. When banks and lenders hire these people, they should most certainly get their view on money, and how it works, along with how they wish to see other people become more successful financially. If they don’t share that vision, they have no business working in finance.
Once investors begin to lose confidence, business is down which makes matters worse and properties get sold for a lot less money and less frequently. There is no great mystery behind what is going on, but the only mystery is regarding who will take a stand for what is right? The financial industry has suffered some staggering losses and will continue to do so if no one takes a stand.
-Mayer Dallal
Having the proper supervisory people in place makes the world go round and having employees that contribute make it all worthwhile and a lot easier to endure. I will say that most companies have it all wrong, and want to get the best around for the least amount of money. When banks and lenders hire these people, they should most certainly get their view on money, and how it works, along with how they wish to see other people become more successful financially. If they don’t share that vision, they have no business working in finance.
Once investors begin to lose confidence, business is down which makes matters worse and properties get sold for a lot less money and less frequently. There is no great mystery behind what is going on, but the only mystery is regarding who will take a stand for what is right? The financial industry has suffered some staggering losses and will continue to do so if no one takes a stand.
-Mayer Dallal
Is All Well That Ends With Wells Fargo?
Wells Fargo decided it might be best to take a closer look at its foreclosure process which was a smart move. Banks are being examined closely in the wake of a time when no one is able to make ends meet, or is struggling too. Banks are also just filing papers quickly without much review. So, with all the review Wells Fargo thought it was a good idea to go ahead and analyze their processes a little bit further.
Affidavits must be signed and finalized by someone before the foreclosure becomes official. Many large companies pay someone a nice salary to do this job and review the papers before they are signed. With this being said, Wells Fargo states that they have the proper processes in place to make sure that the right papers are signed by the right people and that no stones goes unturned.
This process can only be run from the company’s data, meaning the figures on the mortgages and the database showing who is on the list to be processed etc. This is simply a part of quality control, and is done to ensure the accuracy of all paperwork. The story of a man getting his home foreclosed on when he didn’t owe the bank anything is down- right hideous. Think about it; no matter how much you were being paid to sign off on foreclosure documents, would you not review those things to make sure they are correct? Would you want to be out on the street?
-Mayer Dallal
Affidavits must be signed and finalized by someone before the foreclosure becomes official. Many large companies pay someone a nice salary to do this job and review the papers before they are signed. With this being said, Wells Fargo states that they have the proper processes in place to make sure that the right papers are signed by the right people and that no stones goes unturned.
This process can only be run from the company’s data, meaning the figures on the mortgages and the database showing who is on the list to be processed etc. This is simply a part of quality control, and is done to ensure the accuracy of all paperwork. The story of a man getting his home foreclosed on when he didn’t owe the bank anything is down- right hideous. Think about it; no matter how much you were being paid to sign off on foreclosure documents, would you not review those things to make sure they are correct? Would you want to be out on the street?
-Mayer Dallal
The Thirty Year Rises Slightly
Freddie Mac does surveys that follow the trends in the increases in the 15 year and the 30 year mortgage rates. It is always interesting to see what is happening in the markets, and if you have struggled to keep up with it, don’t worry because I keep up to date on everything that is happening. This is what I do, and the only way I can be good at it, is to stay on top of market trends so I can help families understand what is good for them and why.
The latest survey though was about the 30 year fixed rate mortgage and how it increased slightly again. It rose for the second time in six weeks, and ended up at a whopping 4.23%. This was a slight increase from the previous week when it was 4.21%. Doesn’t sound like a lot, but any increase in rates will always tell you what is happening in the market, just like rates going down will show you what is happening in the markets today.
The 15 year did go up slightly, and it currently sits at 3.66%. The week prior it was sitting at 3.64%. Again, it doesn’t sound like a whole lot, but any increase will always tell you what is happening. Things are from over, and they certainly aren’t perfect, but increases in rates mean that there is a very slight improvement.
-Mayer Dallal
The latest survey though was about the 30 year fixed rate mortgage and how it increased slightly again. It rose for the second time in six weeks, and ended up at a whopping 4.23%. This was a slight increase from the previous week when it was 4.21%. Doesn’t sound like a lot, but any increase in rates will always tell you what is happening in the market, just like rates going down will show you what is happening in the markets today.
The 15 year did go up slightly, and it currently sits at 3.66%. The week prior it was sitting at 3.64%. Again, it doesn’t sound like a whole lot, but any increase will always tell you what is happening. Things are from over, and they certainly aren’t perfect, but increases in rates mean that there is a very slight improvement.
-Mayer Dallal
What is the Main Cause of Foreclosures?
I don’t know that the reason for our foreclosure crisis is really a secret, but I do believe that there are multiple reasons. However, if you take a look at the most recent statistics dealing with financial reports, you will clearly see that joblessness is at an all time high, even though rates are at an all time low. It doesn’t balance out, and it doesn’t seem fair.
Rick Sharge, the Senior Vice President for RealtyTrac Inc. spoke with Lisa Murphy on Bloomberg not too long ago and gives us some insight into what is happening. I whole heartedly believe that unemployment is a major if not the main contributing factor for the foreclosures. How can anyone pay their bills when they have no income? They simply can’t, and the funny part is that when you lose your job, your unemployment isn’t instant, yet every credit under the sun expects payment from you. Usually, once you do lose your job you are looking at getting one last paycheck, but even so, it should only be an additional two weeks before you get your first unemployment check.
The point is that with joblessness this high, there is no way that people are going to be able to hold up a mortgage payment, or at least it may not be feasible with very little no savings, and depending on how large that payment is, time could run out very quickly for your family.
-Mayer Dallal
Rick Sharge, the Senior Vice President for RealtyTrac Inc. spoke with Lisa Murphy on Bloomberg not too long ago and gives us some insight into what is happening. I whole heartedly believe that unemployment is a major if not the main contributing factor for the foreclosures. How can anyone pay their bills when they have no income? They simply can’t, and the funny part is that when you lose your job, your unemployment isn’t instant, yet every credit under the sun expects payment from you. Usually, once you do lose your job you are looking at getting one last paycheck, but even so, it should only be an additional two weeks before you get your first unemployment check.
The point is that with joblessness this high, there is no way that people are going to be able to hold up a mortgage payment, or at least it may not be feasible with very little no savings, and depending on how large that payment is, time could run out very quickly for your family.
-Mayer Dallal
FHA's Help for Negative Equity
In August the FHA released a Mortagee Letter offering a refinance program for those who are underwater on their mortgage. So, how are the benefits actually determined in this case? The true success of a plan like this will only be measured by its outcome, and at this point the companies that hold these liens need to be willing to sacrifice a certain percentage of the balance on the loan. This program is not applicable to everyone unfortunately; it will only apply to those who were issued a case number as of September 7, 2010 and get their loans closed by December 31, 2012.
However, as with anything it is best to know the details before you get too excited and carried away. I wouldn’t necessarily describe it as a catch, but there are some things you will want to keep in mind. First of all, the loan you are in cannot be an FHA loan, and your payments must be on time. That’s right; don’t think that because you got frustrated that you could quit making payments and all is forgiven just because you thought the banks were greedy. I can understand your aggravation, but remember you signed the papers with the understanding that you were responsible for paying the loan back.
The maximum amount of money that they can loan you will only be 97.75%, with a maximum combined loan to value of 115%. One would think that this would have been ousted, but keep in mind that there are many who had taken out second mortgages, and had purchased homes with a second broken down into 20%, with the first mortgage being at 80%. This was to ensure that the borrower wouldn’t have to pay PMI. Also, keep in mind that the company that holds your second mortgage must allow the first to remain as the first mortgage. This is what loan officers refer to as a “subordination”.
Once a loan is accepted or approved by the lender, no income or credit verification needs to be done. Here is where things get tricky; isn’t this where the problems started before? You may not agree, but I have found that to be true only on a case by case basis. While I don’t agree with everything banks have done, I have to say that those who have stronger credit up front typically don’t default. Those who make an investment up front on their purchase usually don’t default, while those who aren’t current usually revert back to a very low credit score and so forth. There is always a trend that we can see, and that is what we need to be looking for.
-Mayer Dallal
However, as with anything it is best to know the details before you get too excited and carried away. I wouldn’t necessarily describe it as a catch, but there are some things you will want to keep in mind. First of all, the loan you are in cannot be an FHA loan, and your payments must be on time. That’s right; don’t think that because you got frustrated that you could quit making payments and all is forgiven just because you thought the banks were greedy. I can understand your aggravation, but remember you signed the papers with the understanding that you were responsible for paying the loan back.
The maximum amount of money that they can loan you will only be 97.75%, with a maximum combined loan to value of 115%. One would think that this would have been ousted, but keep in mind that there are many who had taken out second mortgages, and had purchased homes with a second broken down into 20%, with the first mortgage being at 80%. This was to ensure that the borrower wouldn’t have to pay PMI. Also, keep in mind that the company that holds your second mortgage must allow the first to remain as the first mortgage. This is what loan officers refer to as a “subordination”.
Once a loan is accepted or approved by the lender, no income or credit verification needs to be done. Here is where things get tricky; isn’t this where the problems started before? You may not agree, but I have found that to be true only on a case by case basis. While I don’t agree with everything banks have done, I have to say that those who have stronger credit up front typically don’t default. Those who make an investment up front on their purchase usually don’t default, while those who aren’t current usually revert back to a very low credit score and so forth. There is always a trend that we can see, and that is what we need to be looking for.
-Mayer Dallal
Saturday, October 30, 2010
The Foreclosure Moratorium Mess
The moratorium on foreclosures is a horrible idea and for many reasons. Look, I don’t have all the answers, but I can tell you what I do know from experience and you can decide for yourselves.
For starters, it doesn’t really resolve the real issue which is related to many things. Many homes went into foreclosures simply because they were underwater on their mortgages. However, joblessness is a huge contributing factor. Much of what is happening could be corrected with jobs abounding and mortgages being modified to truly put a borrower in a better position. The idea behind the modification is to get the borrower’s payments within a reasonable percentage of their income along with their other debts. Many families still won’t qualify, but there is no way to know for sure unless we try it.
The other big issue here is that the reports, facts and figures aren’t going to be true and genuine. They will only make things worse by not giving the facts on what is really happening. Those cases that have been filed won’t go up for modifications, and can’t be listed for short sales until everything has been reviewed. The only real good that could come from this is that the homeowner gets a little more time in their home until they figure out where they can go. This moratorium prevents the supply and demand, so where do we go from here?
-Mayer Dallal
For starters, it doesn’t really resolve the real issue which is related to many things. Many homes went into foreclosures simply because they were underwater on their mortgages. However, joblessness is a huge contributing factor. Much of what is happening could be corrected with jobs abounding and mortgages being modified to truly put a borrower in a better position. The idea behind the modification is to get the borrower’s payments within a reasonable percentage of their income along with their other debts. Many families still won’t qualify, but there is no way to know for sure unless we try it.
The other big issue here is that the reports, facts and figures aren’t going to be true and genuine. They will only make things worse by not giving the facts on what is really happening. Those cases that have been filed won’t go up for modifications, and can’t be listed for short sales until everything has been reviewed. The only real good that could come from this is that the homeowner gets a little more time in their home until they figure out where they can go. This moratorium prevents the supply and demand, so where do we go from here?
-Mayer Dallal
The Skinny on Countrywide's CEO
If you aren’t familiar with the story on the CEO of Countrywide, it’s okay, but interesting stuff. In addition to all of the other excitement going on in our housing market, Mozilo was slapped with charges for insider trading and civil fraud. Did he do it? I wasn’t there so I have no idea, but I can tell you that he did settle along with two other executives to shell out $67.5 billion dollars to the SEC.
His fine is now the largest ever paid out by a public company in regards to a SEC settlement. The total of $67.5 million will be returned to those who were harmed by the actions. This sort of makes it sound like he is guilty and admitting to something. The insider trading issue has always been about what happens behind the doors in the executive suite. Countrywide was like most lenders in that it was struggling under the weight of bad mortgage investments, and in the heat of the moment many executives cracked. It’s a high pressure industry, from which none of us are exempt. People deserve for their financial planners, investors and mortgage brokers to be honest with them, and under financial pressure it is never easy for anyone.
The best way to conduct business is openly and honestly. Believe me, I have made plenty of mistakes in this life, and I am not here to criticize Mozilo. None of us are exempt from being human, but the difference is when we choose right or wrong, and if we choose to make a change. Then, and only then have we really done our job.
-Mayer Dallal
His fine is now the largest ever paid out by a public company in regards to a SEC settlement. The total of $67.5 million will be returned to those who were harmed by the actions. This sort of makes it sound like he is guilty and admitting to something. The insider trading issue has always been about what happens behind the doors in the executive suite. Countrywide was like most lenders in that it was struggling under the weight of bad mortgage investments, and in the heat of the moment many executives cracked. It’s a high pressure industry, from which none of us are exempt. People deserve for their financial planners, investors and mortgage brokers to be honest with them, and under financial pressure it is never easy for anyone.
The best way to conduct business is openly and honestly. Believe me, I have made plenty of mistakes in this life, and I am not here to criticize Mozilo. None of us are exempt from being human, but the difference is when we choose right or wrong, and if we choose to make a change. Then, and only then have we really done our job.
-Mayer Dallal
Low Rates Make Applications Go Up
For the week ending October 8th, the mortgage applications went up due to a dip in rates. While the dip wasn’t huge, it is still enough to trigger applications to go up. The Market Composite Index showed that applications increased 14.6 percent on a seasonally adjusted basis from the week prior. It seems like a tennis match as rates go up, then down. They just go back and forth and keep you guessing, never knowing what you are about to experience.
Those who were on the fence decided to jump off, and enjoy the fray of refinancing that was spurring underneath it all. It is no wonder that applications were up. People are always fearful of the unknown, and just need that little extra bit of confidence. Those in the business should never lose heart, and it’s all about understanding where the borrower is coming from. Just understand that they need to feel a certain way about things before they are going to make a major decision, so it is our job to educate them, every step of the way.
-Mayer Dallal
Those who were on the fence decided to jump off, and enjoy the fray of refinancing that was spurring underneath it all. It is no wonder that applications were up. People are always fearful of the unknown, and just need that little extra bit of confidence. Those in the business should never lose heart, and it’s all about understanding where the borrower is coming from. Just understand that they need to feel a certain way about things before they are going to make a major decision, so it is our job to educate them, every step of the way.
-Mayer Dallal
Friday, October 29, 2010
Is There Hope for Underwater Homeowners?
If you have never heard of the Value Gap Refinance, you probably will. The Value Gap Refinance program means that there is a guarantor making up the difference between the existing mortgage and the present value of the home. Sound like a dream come true? It will help those who are underwater but it certainly doesn’t change the economy….at least not at this moment.
The difference would need to be established by getting an appraisal of course, that way it is clear what the value is based on the current market. The homeowner would then obtain a new loan at 100 percent of the property’s value and at the current rates.
The homeowner is responsible for paying off the balance, but not the dollar figure that creates that gap. When the home is eventually resold to another buyer down the road, the government will pay the difference between the final selling price and the original loan balance. It’s a program that has been a long time coming, and helping people is what it’s all about.
-Mayer Dallal
The difference would need to be established by getting an appraisal of course, that way it is clear what the value is based on the current market. The homeowner would then obtain a new loan at 100 percent of the property’s value and at the current rates.
The homeowner is responsible for paying off the balance, but not the dollar figure that creates that gap. When the home is eventually resold to another buyer down the road, the government will pay the difference between the final selling price and the original loan balance. It’s a program that has been a long time coming, and helping people is what it’s all about.
-Mayer Dallal
More Home Sales in 2011 ?
Real estate experts seem to think that there will be more home sales next year, but the only way I see that happening is if we can get all foreclosures out, listed on the market. Whether they are purchased by an investor, first-time homebuyer or someone who is just looking to relocate, it doesn’t matter. The key is making sure that what needs to get filed is filed, and what needs to be listed is listed. Either way, I am hopeful that our sales will begin to increase now, but the foreclosure moratorium does tend to slow things down.
Commercial real estate lenders are looking for more sales next year as well, so long as plenty of jobs have been added. When that happens, getting more commercial sales should not be an issue. Everyone who has a rental property whether it is real property or commercial property will still need to ensure that they are able to cover the rent they have on their property.
Flipping no longer seems to be the way to go, and those who were looking to do so now appeared discourage. The fear is that when you buy a property, will you now be able to find someone to buy it after you sink money into it to fix it? It’s a tough call, and word has it that nearly $1.4 trillion in mortgages on malls and other commercial properties will be coming due.
-Mayer Dallal
Commercial real estate lenders are looking for more sales next year as well, so long as plenty of jobs have been added. When that happens, getting more commercial sales should not be an issue. Everyone who has a rental property whether it is real property or commercial property will still need to ensure that they are able to cover the rent they have on their property.
Flipping no longer seems to be the way to go, and those who were looking to do so now appeared discourage. The fear is that when you buy a property, will you now be able to find someone to buy it after you sink money into it to fix it? It’s a tough call, and word has it that nearly $1.4 trillion in mortgages on malls and other commercial properties will be coming due.
-Mayer Dallal
Wednesday, October 27, 2010
Is Real Estate Making a Comeback?
While things may look bleak to the consumer, I get a different view of what is happening everyday as I interact with borrowers on purchase loans and refinance deals. This is good, because it helps me keep things real with those I encounter daily. The media can be so negative, and naturally the more television we watch the worse things appear. There are some interesting things happening, and I will tell you about a few of them.
Foreclosures are slowly rolling in, which is good. I would rather see them go slowly over the hill than flood the banks paper reams. However, I don’t want to see any foreclosures because I don’t enjoy watching families lose their homes. One main benefit, and probably the only benefit is for those looking to buy a home that can now get more house for less money, and for less of a down payment upfront. FHA allows buyers to bring as little as 3.5% down on their new home purchase. This allows the buyer to make an investment, but not have to pull out all of their savings to do it.
Sales are up too, which is always good news. The buying seem to come to a halt after the tax credit expired, but in the end people realized that they can’t just sit on buying a home not knowing whether or not that tax credit would be implemented again. There is nothing worse than waiting, and while some people are good at it, most people hate it. This is still a great time to buy a home, or even refinance the one you are in. In regards to buying a home, there are so many homes out there for buyers to pick from. Whether this is your first time buying a home, or your second, there is still time to get a great deal on a house.
-Mayer Dallal
Foreclosures are slowly rolling in, which is good. I would rather see them go slowly over the hill than flood the banks paper reams. However, I don’t want to see any foreclosures because I don’t enjoy watching families lose their homes. One main benefit, and probably the only benefit is for those looking to buy a home that can now get more house for less money, and for less of a down payment upfront. FHA allows buyers to bring as little as 3.5% down on their new home purchase. This allows the buyer to make an investment, but not have to pull out all of their savings to do it.
Sales are up too, which is always good news. The buying seem to come to a halt after the tax credit expired, but in the end people realized that they can’t just sit on buying a home not knowing whether or not that tax credit would be implemented again. There is nothing worse than waiting, and while some people are good at it, most people hate it. This is still a great time to buy a home, or even refinance the one you are in. In regards to buying a home, there are so many homes out there for buyers to pick from. Whether this is your first time buying a home, or your second, there is still time to get a great deal on a house.
-Mayer Dallal
Monday, October 25, 2010
Unreasonable Requirements
In the past year FHA has made several changes, some of which borrowers thought were too strict. Lenders are now getting rules that are more strict as well, so it applies to everyone. You are probably wondering what makes or breaks a lender in the process of qualifying to do FHA loans, and so I will share a little bit of that information with you, and the reason why things are changing.
The FHA, or Federal Housing Administration doesn’t loan money, but they do insure loans for banks and lenders. Lenders and banks have always had to show that they have a strong and reasonable force behind them financially to do FHA loans. HUD is now asking lenders and banks to reimburse them for loans that were not done according to the agency’s guidelines. Sound odd? Not really, and it isn’t in force yet, but if an agency is insuring loans for that lender they should be doing things right. Insuring loans is risky, and means that if the borrower defaults on the loan then the FHA covers it. So, it makes sense that they would want to take every step possible to ensure that the loans are being done properly.
All in all, this may be part of the reason that the FHA took steps in January of this year to write new regulations and standards regarding their requirements, along with increases in mortgage insurance. The FHA simply needed to find a way to strengthen its insurance fund, and prepare to insure more loans. The FHA loan programs have been booming as a result of a bad economy, in which families were able to buy with less money down than they would have been required to come up with if doing a conventional loan. The major uncertainty was only in the fact that once someone bought a home could they maintain the payments and upkeep? This is the question that FHA is asking to ensure that lenders are calculating debt-to-income ratios properly meaning that families are able to afford the monthly payments after all other bills have been accounted for.
In the past, banks were letting families buy homes with a debt-to-income ratio of 50% or higher. This doesn’t even sound right when we already know that these families have hardly any disposable income left at all. When families have little left over, and they have to choose between feeding the children and paying the mortgage, then they are naturally going to feed the children. Tight monthly budgets have triggered defaults, and therefore this includes even FHA loans too. The FHA wants to make sure that the lenders are following their guidelines, and not just passing deals through to get them done. This will be a huge benefit to everyone.
To find out more about getting your FHA loan today, you can go to www.fhaloansnow.net. You are welcome to use my FHA calculator there to see what fits into your monthly budget before you spend.
-Mayer Dallal
The FHA, or Federal Housing Administration doesn’t loan money, but they do insure loans for banks and lenders. Lenders and banks have always had to show that they have a strong and reasonable force behind them financially to do FHA loans. HUD is now asking lenders and banks to reimburse them for loans that were not done according to the agency’s guidelines. Sound odd? Not really, and it isn’t in force yet, but if an agency is insuring loans for that lender they should be doing things right. Insuring loans is risky, and means that if the borrower defaults on the loan then the FHA covers it. So, it makes sense that they would want to take every step possible to ensure that the loans are being done properly.
All in all, this may be part of the reason that the FHA took steps in January of this year to write new regulations and standards regarding their requirements, along with increases in mortgage insurance. The FHA simply needed to find a way to strengthen its insurance fund, and prepare to insure more loans. The FHA loan programs have been booming as a result of a bad economy, in which families were able to buy with less money down than they would have been required to come up with if doing a conventional loan. The major uncertainty was only in the fact that once someone bought a home could they maintain the payments and upkeep? This is the question that FHA is asking to ensure that lenders are calculating debt-to-income ratios properly meaning that families are able to afford the monthly payments after all other bills have been accounted for.
In the past, banks were letting families buy homes with a debt-to-income ratio of 50% or higher. This doesn’t even sound right when we already know that these families have hardly any disposable income left at all. When families have little left over, and they have to choose between feeding the children and paying the mortgage, then they are naturally going to feed the children. Tight monthly budgets have triggered defaults, and therefore this includes even FHA loans too. The FHA wants to make sure that the lenders are following their guidelines, and not just passing deals through to get them done. This will be a huge benefit to everyone.
To find out more about getting your FHA loan today, you can go to www.fhaloansnow.net. You are welcome to use my FHA calculator there to see what fits into your monthly budget before you spend.
-Mayer Dallal
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