For the first time ever, FHA appraisals have effectively actually had fewer extra requirements than conventional loan appraisals. This has been corrected effective April 1st with HUD Mortgagee Letter 2009-09 which establishes appraisal requirements for declining (in other words, most) markets. Of course, many of these policies have already been implicated in practice by lenders.
Just a quick heads up about a change to the guidelines for the FHA 95% loan to value cash out refinance program effective for all case numbers issued after January 1, 2009. This change does not apply to the standard 85% loan to value program.
The guidelines already included additional requirements that many loan officers have overlooked when taking applications for 95% loan to value cash out refinances: Read the rest of this entry
One of my biggest pet peeves is the phrase I often hear bandied about that ‘FHA is the new subprime.”
No, it isn’t. And knock on wood, it never will be. FHA does provide an opportunity for borrowers who have had credit problems to get a loan. But the differences between FHA doing that and subprime loans doing that are that FHA requires common sense from the underwriter and FHA holds the lender accountable for their default rate. There isn’t an arbitrary rule that says “OK, you’ve been late 1×30 on your mortgage in the last twelve months, so you qualify. We don’t care why it happened, or whether the situation is likely to happen again in the next 3 months. You fit the matrix, you get the loan.”
