FHA to Change Guidelines due to Buy and Bail

A new mortgagee letter from the FHA was posted yesterday. In it the guidelines were changed for those homeowners who currently own a home and are looking to rent the property and buy a new primary residence. The goal of these new changes is to "respond to an unscrupulous practice arising in the housing market that poses a risk to FHA..." This unscrupulous practice is known as buy and bail, where current homeowners buy a new home under the guise that they will rent their former residence and in turn they let the house go into foreclosure.

Here are the highlights:

1) Cannot use the rental income from the previous home unless there is 25% equity in that property.

2) Borrower must qualify for the new mortgage with the new mortgage payment and the previous home's mortgage payment.

3) Surrounding properties with FHA mortgages would be negatively affected by the bail out on the old residences by these customers seeking new FHA mortgages.

Exceptions:

1) IF THE BORROWER HAS SUFFICIENT EQUITY (25% or more) THEN THEY WILL UNDERWRITE USING RENTAL INCOME PERCENTAGES.

2) IF THE BORROWER IS REQUIRED TO MOVE THROUGH JOB TRANSFER WITH CURRENT EMPLOYER THEN THEY WILL UNDERWRITE USING RENTAL INCOME. (NEED VERIFICATION OF SECURITY DEPOSIT AND ONE MONTH'S RENT TO THE BORROWER FROM RENTER)

Hope this helps. Good luck. For the actual mortgagee letter check the HUD website and look up letter 2008-25.

H.R. Bill 3221 - It will soon leave its mark.

I will not re-invent the wheel for discussion on the H.R. Bill 3221 that Bush signed in as law on Wednesday. I do, however, want to get the information out to you in an easy to access format so that you can read the information and understand what it all means.

• The Arizona Mortgage Guru - Here is a great article that explains in detail the different ins and outs that go with the new Bill. Within his article are some great links to other articles that are useful as well. Check them out and a big thanks to Shailesh Ghimire.
• Craig's Blog - Great vantage point from a Realtor's Perspective.
• Down Payment Assistance - WIth the new bill a law, DPA programs have received the axe which means...1) if you are a potential buyer, then call me or any loan officer to get the ball rolling and find the house you want, or 2) if you eventually want to buy a home, then find a way to start saving money for the down payment.
• H.R. Bill 3221 - Glutton for punishment or locked into your job as an LO then knock yourself. All the details in there you will need.

Hopefully that helps as you begin to research and evaluate what it all means.

Freddie Mac and Fannie Mae bill passed by the House

In a move today, which was coming for about a week or so, the House approved the new bill regarding Fannie-Mae and Freddie Mac. The bill is now being pushed to President Bush's desk by, what they are hoping, is the end of the week.

You can read the full article here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAELTC1YJg.A&refer=home

The bill is designed so that ONLY if the two major mortgage players, Fannie Mae and Freddie Mac, begin to have "issues", then government will step in and use this bill to infuse capital and lend to the organizations. The estimated cost to the taxpayers, you and me, is roughly $25 Billion dollars.

In addition, a part of the bill would be used to help about 400,000 homeowners with sub-prime loans avoid foreclosure by being able to refinance. However, the instances of foreclosure in the U.S. is surely greater than that.

Hard to say whether the bill will have a positive impact or not. Only time will tell.