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House Subcommittee to re-examine mortgage lending reform

National Mortgage Professional
Mar 12, 2009

FHA refinances: What you need to know nowJeff Mifsud FHA loans, Mortgagee Letter 08-40, upfront mortgage insurance premium, LTV ratio, HOPE for Homeowners The most recent changes to the Federal Housing Administration (FHA) refinance guidelines became effective Jan. 1, 2009. Keep in mind that the Mortgagee Letter citing these changes also repeated many standing guidelines, which I will do here, as well, as a courtesy to readers unfamiliar with FHA guidelines. Here are the 10 things you need to know about the updated refinance guidelines published in Mortgagee Letter 08-40: • The maximum loan-to-value ratio (LTV) for rate and term refinances (including streamlines with an appraisal) is 97.75 percent. • The maximum LTV for cash-out refinances is 95 percent for loan amounts less than the conforming limit and 85 percent for loan amounts at or above the conforming limit. (It must have 12 months seasoning and no 30-day late payments.) • Two appraisals will be required for all cash-out refinances with an LTV above 85 percent. • The mortgage must be current for the month due. • New or current second mortgages are eligible with no maximum combined LTV. • A loan amount for streamlined refinances without an appraisal cannot exceed the original loan amount. • Upfront mortgage insurance premium (UFMIP) rates stand at 1.75 percent for all rate and term and cash-out refinances, and 1.5 percent all streamline refinances. • The FHASecure refinance has been terminated. • The loan amount can include first and second liens, closing costs, discount points, current interest, pre-payment penalties, pre-paids, late charges, and escrow shortages. • Cash back on rate and term and streamline refinances cannot exceed $500. In addition to the above updates, FHA published changes to the HOPE for Homeowners (H4H) program. As I mentioned in a previous article, there isnt much interest on the part of lenders in offering this program on a wholesale level. Nevertheless, I will highlight the changes so that, as a professional, you're "in the know." The five things you need to know about the updated H4H guidelines are: 1. The mortgage may have an LTV up to a maximum of 96.5 percent of the current appraised value (including the UFMIP), provided the borrowers ratios do not exceed 31 and 43 percent. 2. If the mortgage has an LTV of 90 percent or less of the current appraised value (including the UFMIP), the borrower's ratios may be up to 38 and 50 percent. 3. Borrowers may immediately qualify for the program without any trial modification process. 4. Lenders can now offer the H4H mortgage with a 40-year term. 5. The program now allows two-, three- and four-unit properties. As the yield spread premiums have decreased, hopefully your FHA expertise has increased. Loan originators who have truly taken the time to learn how to do FHA loans well are having a much easier time getting into real estate offices and getting referrals. I was recently in a coffee shop when a group of three people sat at the table next to me for a meeting and began talking about the foreclosures in the area. (I don't make it a habit to listen to other people's conversations, but it was quite impossible in this case not to!) It seemed one was an asset manager for a bank, and was meeting with two real estate agents. One of the real estate agents started singing the praises of this terrific loan originator who does such a great job for her. She commented that the loan originator knows how to get deals through because the loan originator knows how to package the loans properly. I share this story because it illustrates the importance of being knowledgeable and competent in taking and packaging FHA loans; it's the reason this real estate agent had rave reviews about this loan originator. Take the time to learn FHA loans and you will always have a place in real estate offices! Study the guides and mortgagee letters to internalize the program, get an FHA mentor, and go talk to FHA referral sources. With the right combination of knowledge and fortitude, you too can become an FHA expert in your marketplace. Go FHA! Jeff Mifsud founded Southfield, Mich.-based Mortgage Seminars LLC in 2004, has been an FHA originator for 12 years, is a contributor to and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail
Mar 12, 2009
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