Gov’s Gotta Keep Your Home Intact
by Tony Chavira
It seems strangely appropriate that, in light of the housing travesty of the Haitian earthquakes, the Federal Housing Administration (FHA) have announced a new series of policy changes aimed at economic sustainability with a focus on two key points: a) maintaining and increasing their cash reserves so that they can continue to get people into homes, and b) help the agency keep up it’s good work of putting traditionally underserved families into homes ASAP.
The National Housing Conference blog, Open House, has a pretty clear breakdown of the key policy points, but I’m going to take a whack at the points myself for cheap thrills:
1) Increase the Mortgage Insurance Premium (MIP) – The FHA first needs Congress to approve of an increase in the MIP because it’s a great idea that’ll keep the cash flowing toward the agency and help people afford their payments at the same time. Basically this means two things. First of all, the FHA will be able to increase the maximum annual premium they can charge (which doesn’t necessarily sound great for regular people out there), but what the FHA are proposing is an adjustment where, instead of paying a brutal annual upfront premium, you can pay it in portions over the course of the year, and they’ll work to make the payments manageable. That way they are able to build a trust for the agency’s financial future without endangering yours.
2) Update the FICO scores and down payments combination for new borrowers – Next, the FHA have shifted the new FICO score requirement to 580 to qualify for the 3.5 percent down payment program (remember kids, 620 and above is considered a “good” score). People out there who have a score less than 580 will still be able to receive help from the FHA, but they need to pay a down payment of 10% (I’m sure you can see why though, the FHA aren’t exactly encouraging sub-prime loans here).
3) Reduce allowable seller concessions from 6 to 3 percent – This is a big point because the more concessions the FHA provide to sellers, the more they have control over artificially inflating the price of homes they’re trying to sell. Yes, many sellers out there aren’t jerks and just want to sell their homes, but there are always a few bad eggs out there. So by reducing the number of concessions, they’re reducing the risks of small inflated housing bubbles around the country. Good call, I say.
4) Increase enforcement on FHA lenders – No matter what the other policy points were, this point had to be in there somewhere. A big element of these changes will be to publicly report lenders’ performances so that it’s pretty clear who are the good guys and who are the scum bags. Lenders who are doing well and are responsible have nothing to worry about. Lenders who are doing poorly and losing money will probably get audited. Lenders who are doing suspiciously well are probably the ones you need to go after with the full brutal force of your government power.
Regardless, it looks like there’s a lot to work with here and it’s nice to see the FHA chiseling away slowly at their programs and policies to maximize their input and output. As for this post, I hope it helped to show you that your government isn’t just sitting around on its ass and letting people live on the cold, stormy, tornado-threatened streets. There are options out there, homebuyers… just keep your eyes open.
Good luck!
Comments
No comments.
