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bobabrahamson
86 Posts |
 Posted - 05/17/2008 : 12:58:28 PM
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| We have all been hearing that FHA will be the new sub-prime. At the company I work for, the guidelines have gotten more and more strict. I am wondering if the same thing is happening at other companies or if this is the direction that HUD is going in. It would seem that the talk out of Washington is not the same as the actions we are seeing. |
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CoolMtgGuy
3710 Posts |
Posted - 05/17/2008 : 1:42:48 PM
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I am not an FHA broker.
I happen to believe that tightening of guidelines across the board is the direction that things are going for the foreseeable future. Of course that means less number of borrowers getting funded and less number for business for originators.
It is true that words from Wahnington most times don't match actions that make their way to the consumer. That's just the way things work in politics. |
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ladysammm
352 Posts |
Posted - 05/17/2008 : 2:28:04 PM
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FHA has never been nor will it ever be related to Sub Prime. It has always been an avenue for the borrower who did not have sugnificant funds available for down payment but had the ability to meet monthly mortgage obligations without causing hardship even if there had been past credit concerns which could be documentated to be isolated and not a normal pattern of life. that is why the guides were a little more flexible. The goal was to acheive homeownership for the working class as their primary residence with payments they could really afford based on the current income and past credit repayment history.
In fact there have been many borrowers that ended up with a subprime loan that would be fully qualified for FHA with much better loan terms. it has only been recently that the effects of sub prime have forced lender to pull in the riens for government loans.
It is a fine line that separates these two types of loans. The true FHA loan is one where the borrowe cleary qualifies with reliable and documentable income and if there are credit concerns, it can be documented that the borrower does not currently continue to abuse credit obligations and that they have made strides to better themselves or provide good evidence that the situation was out of their control.
It is a hard task to realize a person just may not be ready for the responsibility of homeownership and harder to tell that to the borrower directly. It is fairly easy to determine if the borrower is a good risk dispite what appears by reading between the lines of the application and credit.
I believe that lenders are doing there best to weed through the requests and grant approval to those who truly fit the guidelines. FHA does insure the loan, however if a claim if filed and upon investigation by HUD it is determined the loan should not have closed, they can choose not to pay the claim to the lender and the lender has to service the loan on their books for at least 12 months then we will be looking at this fall out all over again.
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bobabrahamson
86 Posts |
Posted - 05/17/2008 : 2:49:28 PM
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| Great response, I couldn't agree with you more. Lenders are trying to close the barn door after the horse has gotten out and been hit by a truck. |
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fharep@gmail.com
125 Posts |
Posted - 05/17/2008 : 11:37:48 PM
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| A lot of lenders are putting scores on their FHA loans to fund quality paper. With the influx of FHA business they can cherry pick for the time being and not be swamped with garbage loans. |
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MisterVA
6633 Posts |
Posted - 05/18/2008 : 05:36:24 AM
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| Another factor at work here is that many loan officers who did not have FHA but did not want to lose a client utilized subprime avenues for their borrowers. It was not the best solution for many borrowers, but rather than lose a deal, a program was found that would work. Subprime was and always should have been a loan of last resort. I think that many loan officers who now have the ability to use FHA are incorrectly viewing it as the 'new subprime'. However, some of the poor quality stuff that was done 'all day long' by subprime lenders is now automatically 'FHA' in the minds of many loan officers. What it is doing is clogging up pipelines and slowing turn times for good FHA loans. |
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mortgagegirl1010
203 Posts |
Posted - 05/18/2008 : 07:16:17 AM
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I agree misterva
At least in Florida Fha was not very popular and most shops were not approved Fha
they probabally did not want to go through the hassell when the borrowers were agreeing to these sub prime loans !
as a processor the main thing I have to educate loan officers on is that FHA is not a substitution for very bad credit. I see some files that they try to submit that should be hard money!
I agree that the lenders are probabally backed up with alot of crap files. That is why a good processor is imperative to scrub these FHA files prior to submission.
I am sure some l/o aren't happy when I tell them a file won't fly but they need this until they know the guidelines. That's the problem too. Many are not taking the time to learn them. All it does is clog the system
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bobabrahamson
86 Posts |
Posted - 05/18/2008 : 08:01:29 AM
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| I had not thought about the fact that many brokers could not do FHA so rather than lose the loan they stuck paople in sub-prime. I have been doing FHA loans since 1989. Maybe a more streamlined broker approval process would have helped, but it is a little late for that. As someone very involved with FHA loans I do not see them as our salvation. |
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ladysammm
352 Posts |
Posted - 05/18/2008 : 08:15:17 AM
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That is what I was referring to. As I have been doing FHA since 85 and through the years have worked in many facets of lending. As a former in house and contact processor I saw many loan officers go sub prime because it was quicker and easier than spending time with borrower to document and structure file for FHA.
I choose now to wholesale AE because it allows me to share FHA knowledge with those who are now looking to understand and help prepare a refer fot best possible presentation to underwriter educating loan officers regarding the 4155. and all the ways it provides insight to structuring files to comply if possible.
pam.kirchner@assurityfinancial.com |
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