Grand Rapids Mortgage Company

The FHA is experiencing huge losses from Condo Loans due to delinquency and defaults.  The Florida condo market alone is putting a drag on the Federal Housing Administrations with 16 of the top 25 locations with the highest defaults. Punta Gorda on the Gulf Coast is leading with a default rate at 22.7%.

FHA is being forced by standards set by congress to gather up additional reserves to insure against future defaults. Over the past five years, the Sunshine State has sucked the FHA into more than 11,000 loans totalling over $1.7 billion dollars. Prior to the economic problems, FHA condo loans performed better than loans on stick built homes. Now 28% of the FHA condo loans in Florida are seriously delinquent. In Broward County 4 out of every 10 condos are in default.

FHA Default Reasons

The reason for the defaults are due to the dropping property values.  According to Corelogic, a property valuation firm, since 2006 property values have dropped over 45% in the state of Florida.  At the time of purchase, several of the home owners did not have funds necessary for the 3-3.5% down payment required by FHA so they took advantage of down payment assistance and were able to make the purchase with little or no money out of pocket. Once the economy took a turn for the worse, these borrower had no money to plan for unexpected setbacks.

FHA’s Fixes

The FHA has done several things to guard against further losses.  They have removed most down payment assistance programs and raised the minimum down payment to 3.5% of the sales price.  Starting April 5th up front mortgage insurance will be raised to 2.25% of the loan amount up from 1.75%.  Additional measures have been levied specifically against condos.

Condo Restrictions

Nationwide regulations require that at least half of a condo project’s units are sold prior to the agency backing a loan.  No more that 30% of all unit may have FHA insured mortgage.  Additionally, the entire project must obtain FHA approval prior to the FHA insuring even a single unit.  In the past, spot approvals were allowed for specific exceptions.  

If you have questions or concerns relating to condo project approvals, please use our contact form and our consultants will provide our expert advice.

Posted To: Pipeline Press

I couldn't make this stuff up. "Octomom" is facing foreclosure, and a leading adult entertainment kingpin is offering to pay her mortgage. Only in America! Dear Abbey, "If a mid-sized lender that is not doing any FHA loans (or is about to go through their test cases) and absorbs or buys a branch or smaller lender who is fully "up and going" with its FHA lending, does that allow the mid-sized lender to start doing FHA loans?" Signed, "Searching for Shortcuts in Saginaw." Dear SSS, " The surviving entity has to have the approval . The acquiring non-approved company must go through the process of converting the approval to the official (surviving) entity, which is easy presuming the acquisition (absorption) results in a qualifying entity. In other…(read more)

With the constant tightening of guidelines and increases in regulations, we have been surprised with a stunning breakthrough for those who want to give house flipping a try.   The Federal Housing Administration (FHA) has recently announced a waiver of the regulation that prohibits FHA financing to purchase properties which have been purchased by a flipper within the past 90 days.

This announcement has not yet been posted with specific detailed guidelines, however David H. Stevens, Assistant Secretary for Housing – Federal Housing Commissioner, has released the following information (NOTE: If you are a regulations nerd, like me, you will understand the specifics in the next paragraph – others may want to skip to the follow paragraph.)

“Pursuant of 7(q) the Department of Housing and Urban Development Act (42 USC 3535(q)) and 24 CFR 5.110, I hereby waive 203.37a(b)(2) of the regulation.”  This is the regulation that prohibits FHA insured financing if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller and the seller does not have any specific exemptions.

Requirements:

• Property must be an arms-length transaction
• seller must hold title to the property
• LLCS, Corporations and Trust must be within the law
• No previous flipping activity for the property (withing a 12 month time frame)
• The property must be marketed openly and fairly via MLS auction, for sale by owner offering or developer marketing.

In summary, this allows property flippers to sell their fliped houses to clients that will be purchase with FHA financing.  This is a crucial type of financing for first time home buyers and those whom don’t have a 20% down payment. 

Go ahead, Flip that house!

House Passes FHA Bill

[youtube]http://www.youtube.com/watch?v=YCyX4pUUvs8[/youtube]

HR3146 – FHA loans become harder to get for homeowners.

 FHA loans get more expensive and tougher to get for the average family. The federal housing administration claims that loans originated at 100% Loan to value, also known as no down payment loans, were twice as likely to fail as those with 95% Loan to value.

Buying a new home gets harder

The FHA Taxpayer Protection Act of 2009 adds to the recent changes in FHA loans that now require 3.5% down payment (from a previous 3%) and 1.75% up front mortgage insurance (from 1.5% in early 2009).  With the new bill the down payment will be 5% with as much as 3% up front mortgage insurance. 

On top of that allowable seller paid closing costs will be reduced from 6% down to only 3% forcing borrowers to bring additional cash to closing for prepaid items such as home owners insurance and taxes.

These changes will make it even more difficult for the average person to acquire an FHA loan which is still the most flexible mortgage  program available despite recent changes.