Some Great and Not So Great Real Estate News

This week we had some great news. Existing home sales: up again. Inventory: down again.  Housing starts: up again.

The bad news?  Credit quality will still be an issue. Now FHA is jumping into the “buyback” game.  Lenders will tighten FHA underwriting for sure based upon this…

The Federal Housing Administration will toughen its standards for approving lenders that insure mortgages on its behalf and force more of them to buyback defaulted loans. FHA Commissioner Carol Galante said the rule changes will help the agency protect its Mutual Mortgage Insurance Fund, which, according to some, is in danger of needing a bailout. The fund slipped to a 0.24% capital ratio in the fiscal year 2011, down from 0.5% the year before. The rules were initially proposed in October 2010. The rule changes apply to lenders authorized to insure home loans for the FHA without first submitting documents to the agency. Roughly 80% of all FHA-insured mortgages are done this way. The FHA will make it tougher to get approval for the coveted status. According to the new rule, a lender must hold a serious delinquency rate at or below 150% of the program’s average for the two years prior to its application. This rate will apply to all states in which the lender does business. Also, the final rule forces lenders to indemnify – or reimburse FHA for an insurance claim – if the lender “knew or should have known” of any fraud or misrepresentation involved. Lenders would be on the hook for indemnification if the loan defaults within five years of origination. Source: HousingWire

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