Rob's Rant

You likely are aware that Pres. Bush earlier signed a new law into effect entitled "Federal Housing Financial Reform Act of 2008".  There are several sections to this Act, and today I will be discussing the portion that specifically pertains to FHA loans.  In upcoming weeks I will discuss other portions of this law that will affect you and your mortgage.

Remember I am not an attorney and so please do not construe my Blog as legal advice. 

Here are some of the highlights:

FHA Loan Limit is established at the lesser of 115% of the Median Home Price in a market, and 150% of the current conforming loan limit (as of now that figure is $417,000).  The minimum it can be is 65% of the conforming loan limit.

Remember the DPAs we were talking about?  They have been eliminated.  The HUD Secretary is instructed by Congress to eliminate the DPAs by 10/1/08.  We shall have to see exactly what that deadline means.  The actual language of the Act states "[t]his subparagraph shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008."  I expect FHA to issue the actual rule change sometime around 8/15/08.  Come back around that time for an update.

The minimum investment from the Buyer has been raised from 3% to 3.5%.  With the exception of the DPAs, however, other sources of Down Payment are specifically still allowed under the Act.  So family, charities, etc. are still allowed to give the money for the 3.5% down payment.

Reverse mortgages have some slight changes under the Act, including limiting origination fees and raising the limit on FHA reverse mortgages to match the limit on normal FHA loans.  There is a prohibition against lenders requiring borrowers to purchase annuities or other products in order to receive a reverse mortgage.  Amazing that one was not already in there!

Energy-efficient mortgages can include up to 5% of the property value for energy-efficient improvements.  FHA will have a 5-year pilot program to allow Automated Underwriting for borrowers with no credit history.  (Currently these loans must be Underwritten manually, unlike everyone else).  And Congress is giving FHA $100 million over the next 4 years to improve their technologies and processes to assist in the elimination of fraud and modernization of the Agency.

The last item is a moratorium until 10/1/09 on any changes in FHA Mortgage Insurance pricing.  FHA had released as of 7/14/08 a risk-based scale--people with better credit and more $ down paid less for Mortgage Insurance through FHA.  This will return to the pre-7/14 levels by 10/1/08.

The item you will hear most about in Arizona is the DPA elimination.  In the short-term this will be painful, however as you have seen in my previous postings, it seems to me this will be a good thing for all of us in the long run.

I hope this is helpful to you.  Should you wish to read the new law, here is a Link to it:

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221enr.txt.pdf 

If you have any questions about the specifics of your situation, please contact me directly.