FHA rant

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khoiey

1181 Posts

Posted - 05/15/2008 : 10:19:24 PM

How is FHA competitive? Sorry.. Those subprime people I have been dealing with have at least 2 mortgage lates, tons of collections, judgments, liens and high DTI. For A paper clients who I service can and want to put 10-20% down, 680+ credit score, good DTI doesn't need to go with FHA. So far I haven't see any "subprime" borrower who can qualify for FHA and most would have to be stated/stated.

I also haven't run into people with good credit score who only want to put 3% down. Most of people I know with good credit score want to put 10-20% down because they are conscious about debt and traditional in a financial sense.

FHA lenders try to recruit me because "WE DO FHA and you make MORE YSP with FHA yada yada". I know FHA is good for people with good DTI, stable job, good credit and have no money for downpayment or closing costs. But the thing is, those people are renting until they save money up until they can afford 20% downpayment.

Clients who ask if I do FHA, chances are they DO NOT qualified for FHA.

mantixmortgage

2505 Posts

Posted - 05/15/2008 : 10:26:28 PM

well i think some people would tend to agree with you, including myself to a degree. i like to push FHA but its not the first thing i go to by any means.

but what about those inbetween type of clients that have like a 640 fico and are at 85-95% and need to refi out of an ARM or want to purchase a property? also people who are full doc but you keep getting EA-1 and they are at 90%, etc

khoiey

1181 Posts

Posted - 05/15/2008 : 10:46:56 PM

Most people with those score they either have a late mortgage and their actual DTI is like 65 and with collections.

My point is (maybe it is my niche) most of my clients or referrals with 640s have verifiable 10-20 downpayment and 55-60% DTI. So far I haven't run into a perfect FHA scenario. These are the clients I run into: 515-620 fico, collections, several part-time jobs, no downpayment, want to buy houses more than what they can afford. Once they found out they can't qualify for the crazy high loan, they don't want to look at cheaper houses. Some of them called me back and said they are doing FHA loans with this mortgage guy and *****ed me out. Weeks later, they got denied and called me for advice how to get their money back or any other solution I may have for them but I told them I have none.

Oh and not to mention to a dumb realtor called me and asked: my client with 540 fico, can he go FHA? What that realtor didn't realize is that client has open collections of $5K+. No sh*t jose! really? with 540 you think that person is actually paying bills?

I'm just tired of recruiters/net branches called me all day long with their FHA pitch; paying a lot more YSP comparing to conventional etc.

quote:
Originally posted by mantixmortgage

well i think some people would tend to agree with you, including myself to a degree. i like to push FHA but its not the first thing i go to by any means.

but what about those inbetween type of clients that have like a 640 fico and are at 85-95% and need to refi out of an ARM or want to purchase a property? also people who are full doc but you keep getting EA-1 and they are at 90%, etc

rtrefflich

2352 Posts

Posted - 05/15/2008 : 10:54:34 PM

Here in CA there are tons of people who have 640's with no mortgage lates and can go full doc, the only problem is the only option they have now is FHA. You see it all the time, the guy who is borderline and can't do anything unless he goes FHA.

I have never done FHA and am really considering it. I have been able to refer the purchases out simply because I do the real estate, but on the refi's its the only way to make money on a lot of loans that will be coming in in the future.

dkendall1979

8001 Posts

Posted - 05/15/2008 : 11:01:05 PM

I just love the fact that you see it that way.

Meanwhile, the direct answer to your question is, lenders want a loan product that is "sellable" on the secondary market in case they should need to free up some capital down the road. Believe it or not, the 20's of the 80/20's are going for about .1 right now.

The gov't is insuring the loans, taking the risk off the lender but keeping the profit in their pockets. So, regardless of what rant you come out with, FHA will be a pivotal hub in each of our mortgage future.

khoiey

1181 Posts

Posted - 05/15/2008 : 11:01:08 PM

FHA will be tighten the noose soon as well. Yes FHA is good for some, but not tons of people would waltz in and qualified. Unfortunately for my market, not much for FHA right now.

quote:
Originally posted by rtrefflich

Here in CA there are tons of people who have 640's with no mortgage lates and can go full doc, the only problem is the only option they have now is FHA. You see it all the time, the guy who is borderline and can't do anything unless he goes FHA.

I have never done FHA and am really considering it. I have been able to refer the purchases out simply because I do the real estate, but on the refi's its the only way to make money on a lot of loans that will be coming in in the future.

Janlynn

83 Posts

Posted - 05/16/2008 : 05:46:24 AM

I also have never done FHA, but I may have to look into it soon. One of the main reasons is that from what I have heard, FHA does not take declining markets into account, and that could be key for purchasers with 5% or less to put down.

With Fannie Mae, between the DU, appraisal and PMI, there are lots of ways that declining markets can cut the LTV by 5% and thus kill the loan if they do not have an additional 5% to put down. Is that correct that FHA does not consider declining markets?

bramous

807 Posts

Posted - 05/16/2008 : 05:54:58 AM

quote:
Originally posted by dkendall1979

I just love the fact that you see it that way.

Meanwhile, the direct answer to your question is, lenders want a loan product that is "sellable" on the secondary market in case they should need to free up some capital down the road. Believe it or not, the 20's of the 80/20's are going for about .1 right now.The gov't is insuring the loans, taking the risk off the lender but keeping the profit in their pockets. So, regardless of what rant you come out with, FHA will be a pivotal hub in each of our mortgage future.

Funny you mention about the seconds...I have people calling me trying to get rid of their private seller held 2nds...and asking .90-.95....I laugh my @ss off.

khoiey

1181 Posts

Posted - 05/16/2008 : 08:26:51 AM

I believe that FHA guidelines are so back in the days with no new update to to current risk market. Soon or later, they will adjust or the lenders will add in their own.

quote:
Originally posted by Janlynn

I also have never done FHA, but I may have to look into it soon. One of the main reasons is that from what I have heard, FHA does not take declining markets into account, and that could be key for purchasers with 5% or less to put down.

With Fannie Mae, between the DU, appraisal and PMI, there are lots of ways that declining markets can cut the LTV by 5% and thus kill the loan if they do not have an additional 5% to put down. Is that correct that FHA does not consider declining markets?

ehm3

920 Posts

Posted - 05/16/2008 : 08:44:43 AM

well, the facts are quite simple: FHA originations have grown by a factor of approximately 700% in the last 12 months.

So I'm thinking it's your niche that is blinding you. Which can be viewed 2 ways:

1. you have an excellent core business that really won't be pushed around by market trends

or

2. you have a huge opportunity for growth

either way its probably a good thing, but the bottom line is that FHA is probably the best thing going in the industry right now and most LO's will not be able to survive without it.

lemeuss

200 Posts

Posted - 05/16/2008 : 08:51:06 AM

FHA is amazing right now, especially with borrowers up to a 719 FICO getting hit in pricing....anything 620-660 w/a high LTV, especially cash-out refi's, is an FHA no-brainer w/all the hits being thrown at borrowers by GSE's. I'm having more and more borrowers qualify through AU w/FHA...and those that don't (ie mortgage lates, BK) reveal the true beauty of FHA, the manual underwrite....if you've got a good story that makes sense, then oftentimes you've got a closed deal if you're working with the right lender.

I was INCREDIBLY skeptical and resistent towards FHA at first, but after getting my feet wet, it's a great tool...and I don't care about increased YSP, I care about closing loans.

khoiey

1181 Posts

Posted - 05/16/2008 : 08:58:04 AM

Then FHA makes sense. Sadly for me, those people with your scenario below have lates, collections, etc. lol. Which state are you in?

quote:
Originally posted by lemeuss

FHA is amazing right now, especially with borrowers up to a 719 FICO getting hit in pricing....anything 620-660 w/a high LTV, especially cash-out refi's, is an FHA no-brainer w/all the hits being thrown at borrowers by GSE's. I'm having more and more borrowers qualify through AU w/FHA...and those that don't (ie mortgage lates, BK) reveal the true beauty of FHA, the manual underwrite....if you've got a good story that makes sense, then oftentimes you've got a closed deal if you're working with the right lender.

I was INCREDIBLY skeptical and resistent towards FHA at first, but after getting my feet wet, it's a great tool...and I don't care about increased YSP, I care about closing loans.

djorge44

1184 Posts

Posted - 05/16/2008 : 09:07:42 AM

No offense, you need to take more apps then and on more solid people. 60-65% back end means no mortgage, there is no magic program for these people.

****I know some people have gotten loans done with high back ends, I am saying in general they should not have that mortgage*****

khoiey

1181 Posts

Posted - 05/16/2008 : 09:35:49 AM

None taken. So far I've been running into good people that fits well with conventional with no hits. Those that approach me with FHA apps do not qualified. Maybe it's a regional things or niche. (my niche is asians and upper class caucasians).

quote:
Originally posted by djorge44

No offense, you need to take more apps then and on more solid people. 60-65% back end means no mortgage, there is no magic program for these people.

****I know some people have gotten loans done with high back ends, I am saying in general they should not have that mortgage*****

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