What's the Success of CW FHA Loan Change Proposals

[dmyers1166]

I listened to Treasury Sec. Paulson this morning on the stimulus package and if we take the leap and assume that FHA changes occur to increase FHA limits to 125% of median home price that would bring some of CA loans to 729,000 max. I thought I could never qualify for that program with a mortgage in the 650 range. Now maybe that would become an option. This opens up many new borrowers to the early Dec. info given by the administration for moving existing loans to FHA area.

So what is the success of people going into FHAsecure and the other FHA programs?

I'd like to know what other people think the effects of these changes might have in the big price states?

FHA is a Full Doc qualifying product....no ifs, ands, or buts. The income must support the proposed debt structure. Then the collateral (property) must support the request with it's value. Credit can be blemished, but within the tolerances that an FHA underwriter would accept, each one of us is different in our tolerance and it is case by case.

FHASecure has proven difficult as the values have not supported the request and we could not cram the foot (loan) into the shoe (program). Additionally the income has also presented issues with the program as we are seeing 53% ratios on the Bottom ratio. That is extremely difficult to shove through through the doors of FHA, you must have extremely and I mean extremely compelling compensating factors and we are not seeing those - like 3 months PITI or more reserves, Equity in the Property (see above value issues), Income not viable for qualifying, but can be considered as a compensating factor.....all kinds of strong compelling compensating factors and more than one for that size of a ratio, in other words compensate with income and reserves both, that size ratio 53% does not get "blessed" with just one comp factor.

Either way FHASecure and FHA regular have the same qualifying issues in value and ratios, the difference is that the FHASecure will allow late payments on the mortgage after the adjustment (not before -must have 0x30 prior 6 mos before adjustment) and a CLTV over 100% if there is a second mortgage involved. The subject first still has to meet that 97% LTV issue. Given the constraints in qualifying I and others think that the raise in Loan Amounts looks good on paper for the government, but in actual reality may not serve the borrower as much as it looks good.

The 24 month documented income requirements for a 750,000.00 loan are at about 160,000.00, I sure do not make that kind of money....... The underwriters will be more critical at these loan limits - way to much on the line to loose. That will go for FNMA and FHLMC as well on the conventional side of the world. Underwriters are going to be split up by their companies if the companies are smart and make sure that the underwriter approving credits of greater than lets say 500,000.00 have some real seniority - large credit, critical risk management/analysis issues.

Having said all of that, if you have the income, if the property has the valuation to support and the credit supports the request.....it is going to be a God send.

[dmyers1166]

Wow ... great to hear such expert info. If I can hold a 670,000 appraisal, which is median current in L.A. dec. The house is above median but I think the Median is high right now I would make 97% LTV on first, 630 balance. No lates in 24+ months so that is good. No adjustment yet ... pay option so have to get to 115% for an big adjustment. You would be amazed how much is cost to live in Calif unless your doing a liar loan. All family's are two income earners we are 170+ gross and 150 going back 24 mos. All fully documented.

So is the ratio on Gross or after all other debts. I can reach mid 30's with all debts removed from income.

One thing where were these senior doc people when they were writing 800k loans in Orange county (even higher mean than L.A. county). If they didn't write them the country wouldn't be in this mess. I will accept my blame for my crisis, but where are the bankers accepting there total screw up.

Thanks though for the info I will keep my ear out and see if this helps in a month or so.

Originally Posted by dmyers1166

Wow ... great to hear such expert info. If I can hold a 670,000 appraisal, which is median current in L.A. dec. The house is above median but I think the Median is high right now I would make 97% LTV on first, 630 balance. No lates in 24+ months so that is good. No adjustment yet ... pay option so have to get to 115% for an big adjustment. You would be amazed how much is cost to live in Calif unless your doing a liar loan. All family's are two income earners we are 170+ gross and 150 going back 24 mos. All fully documented.

So is the ratio on Gross or after all other debts. I can reach mid 30's with all debts removed from income.

If the above holds and please as soon as the program for higher loan limits hits, get in line right away, values are declining regardless in the Cali area, you have a very respectable chance of getting out of the toxic product you are in. Also be aware there are no limitations in the FHASecure program for when you loan is set to adjust, hit the 110% cap, whatever, it is for any loan set to adjust except an FHA ARM loan. The pay option is eligible regardless of dates, adjustment, etc....this is a net benefit program - ie net benefit get the borrower out of the "cruddy" product they are presently in.

The ratio is on gross income prior to taxes, mid 30's on first ratio great, 2nd ratio will go to 45% or higher with compelling compensating factors, in the case of strong credit and strong income history may only take a 12 mos average, depends on the case.....

Where were the underwriters, we were being fired, laid off, ushered out the door, told we did not fit the "new" lending precepts, did not fit, whatever, we knew this was crap and we were not wanted.

[dmyers1166]

Again thanks for the info, very helpful.

A whole interesting world will come out of this in the years ahead. 80% loans can't be the final standing it won't work but neither will 100% no docs. Lets hope we can get back to maybe 95% with insurance and stable prices and owner occupied full doc loans. That is a reasonable world with arms that are qualified at the full rate.

That world is a ways off, but I hope they (the regulators) so overreact that no one can by houses has prices will really sink in that world.

There is some kind of happy medium out there.

I hope you are right, but we still are not seeing it. Common sensed underwriting and risk management to the old values that are tested and tried models still are not emerging in the underwriting risk management platform. The push back from the Broker is obscene, Lender management still has the almighty dollar held high and "real" underwriters are still struggling to make "real" solid decisions that are upheld by management. Misery is still rampant, I hate to say it but there are days some just cry all the way home from work.

[mochalover]

I am very confused about the FHA Secure loans. What are the requirements to obtain one? My home appraised in Nov, 2007 at $101,000.00, probably less than that amount today. I owe $120,000.00. I am current and have been, I had one 30 day late with EMC in June, 2007. It was not my fault but ever since I have been paying them over the phone. I have no equity in my home. Is it possible to obtain this loan or is a loan modification my only option? I so hate being in the situation.

As what you owe is greater than the value/appraised valuation of the subject property FHA or FHASecure can not be assistance at this point. They require an equity position of approximately 3% for the First Mortgage being refinanced in the FHASecure program and allow the Second only if there is one to exceed that value. Regular FHA also requires an approximate 3% equity, if you owe more than the subject property value at this time, neither would be effective to resolve your problem today as today there is no equity position.

Later when this whole debacle is cleaned up, sooner I hope rather than later and values stabilize, you do have equity equal to or about 3%, you should without hesitation look at the getting into a more stable, respectable and less volatile product which is what FHA is, solid, respectable and stable product. AT that point never look back. Do not take anything less than what guarantees you your security in your home.

[mochalover]

Again, thank you so much for your help. If I follow the advice and insight on this website maybe I will be able to start sleeping and eating again. I am so confused about what to do and everyone I have come in contact with (before this website) has a story and/or advice which conflicts with the next person. This site just makes me feel better.