FHA Announces Changes
The course of the past week, the Federal Housing Administration (FHA) has announced several policy changes in order to better manage risk while continuing to support the nation's housing market recovery.
Three items in particular will impact PHH’s current FHA product parameters:
• MIP: Up-front Mortgage Insurance Premiums (MIP) will increase from 1.75% to 2.25%.
This change will be effective for all FHA purchase and refinance transactions (including streamline) with case number assignment dates on or after April 5, 2010. The required system updates will be a priority. As this date approaches, pipeline will be monitored and communication will be issued to outline the corresponding policy updates that will be made.
• Seller Contributions: Allowable seller concessions will be reduced from 6% to 3%.
This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
• Waiver of the 90 Day Property Flipping Rule:Re-sales occurring up to 90 days or less following acquisition are not currently eligible for FHA financing, providing the seller does not come under any of the specific exceptions that apply to the 90-day rule. To help support housing recovery and to allow more opportunities for investors to refurbish and resell properties, this restriction is being waived only for transactions meeting the following conditions:
1. All transactions must be arms-length, with no identity of interest between the buyer, seller or other interested parties to the transaction.
2. If the sales price of the property is 20% or more above the seller’s acquisition cost, the lender must justify the increase in value with supporting documentation and a property inspection report must be ordered and provided to the purchaser before closing.
3. This waiver will expire February 1, 2011 unless otherwise extended or withdrawn by the FHA Commissioner. All other guidance regarding property flipping prohibition remains unchanged.
What does it all mean for home buyers and home sellers in Southeast Texas?
- Home buyers will have to save up a little more to cover the up-front MIP increase
- Home sellers can't help out quite as much with a closing cost contribution, which means home buyers will have to save up a little more to cover closing costs.
- Investors with the ability to buy distressed homes below market prices and renovate them won't have to worry about the anti-flipping rule. That means more renovated homes for sale.
Overall, I don't see the changes having a significant impact on the Southeast Texas housing market. Most sellers in the area weren't willing to give 6% in closing costs anyway. 3% assistance is far more common. What do you think? Are the new changes going to affect your home buying plans? Let me know.