To many that is what goes through their mind when they hear FHA loans referenced. This article is written directly to loan officers. If you are a consumer, fine, this will give you some insight. If you are the owner of a mortgage company, please listen in – rather read on.

My first mortgage job was with a large regional bank. I had been an agent for many years, head of real estate acquisitions for a developer, never a loan officer. The bank I was hired on to work with had a startup division in partnership with a local real estate company. The market was on fire with refinancing and they were having trouble getting experienced loan officers. This was about 20 years ago. See, refi booms are not new to the economy.

Being a team of rookie loan officers our management decided to delay our use of FHA. They wanted us to keep to the simpler products. Sadly, business was too good for them to ever introduce us to FHA, other than to embed in my memory their excuse, FHA is too difficult for you to learn now. I eventually moved from being a banker to being a mortgage broker. As many brokers do, I built my own book of business and became fairly successful and independent. Still no FHA in my knowledge base, I assumed that I didn’t need it, and thought it much too difficult to bother with.

Fortunately, I sat next to an old sage (I say that lovingly now) who kept hammering on me about the benefits of FHA. After many weeks, I let him help me. A whole new world of customer service was opened up. I could perform the No Sub Prime Miracle for people. Mind you, I hated sub prime and rarely performed it on people. I felt it was like a lobotomy, only do it rare instances. I could help people who had credit problems and bankruptcies in a shorter time frame. I could help people that didn’t have a big down payment. I could prove the credit report was wrong and still do the loan.

Up until the opening of my own mortgage company I became the FHA king. Yes, that is what the office called me. I loved it. I could make more sales, be competitive with any other product, and look like a hero to my clients. Do you think I earned referrals and repeat business?

I remind you this is for loan officers with the rest of you listening in: I challenge you and promise you. I challenge you to only work for a company that can provide you FHA as a product. I promise you it will be the most rewarding part of your practice.

Brokers that tell you the audits are too expensive and the restrictions are too much are telling you half truths. There are painful and expensive audits and there are restrictions, but if they are serious about providing you the loan officer with the tools you need, FHA frankly has to be one of them.

My first employer, was taking the easy road. The volume was almost more than they were geared up for with simple conventional refinances. The learning process for FHA would have been a piece of cake and not that different from other things I have had to learn. They would have had to have extra effort on their part and put a load on the underwriter they hired, but it could have been done. It should have been done.
To you my loan officer friends, not having FHA is forgivable, was forgivable, as I have now raised the bar for you I hope you know is now unforgivable.

Larry Cragun

The DPAs (or DAPs, as they are also called) are fighting the ban imposed by HUD. The Bank Lawyer’s Blog offers an anlaysis of the situation:

…this is only a preliminary injunction. If HUD sticks to its guns, either the district court will eventually see the light or an appellate court will eventually correct his erroneous thought process.

I’m still sticking to my earlier hot opinion: “AmeriDream will lose its lawsuit to overturn the FHA’s decision, and seller-funded DAP will be a no go from now on. Bank on it.” Unfortunately for the taxpayers, the “now” in “from now on” may be many months in the future. In the interim, look forward to more losses funded by your tax dollars, as DAP loans continue to default.

Now I know that many out there think that the ban on DPAs is screwing lower-income families, but with the lower down payment standards that will hopefully be implemented in the near future, they would have no purpose anyways. Not to mention, anyone can see that when a seller pays the down payment and then jacks up the house price, the buyer loses.

If you are someone that has had a FHA Loan for a period of time, you might not have realized that you don’t have to always pay mortgage insurance premium. I remember when my husband and I first bought our house this was something we talked about. Then as time went on, we forgot about it.

I did some research and thought I would answer this question here this time. What I am about to share is food for thought. You will want to get rid of your premium mortgage insurance because it is not tax deductible, like mortgage interest. I’m always happy to receive that statement at the end of the year from our mortgage company in preparation for our taxes.

When you first purchase a home, you are looking for all the deductions you can get. True you get a lot that first year you purchase the home more than the following years, because you have points as well as mortgage interest and some other items. Let’s get back to premium mortgage insurance and when can you stop paying it.

I must share that this very question was addressed in a lot of different places. One of them being moving.com. What I liked was that the lender could not force you to keep the PMI once the loan-to-value has gone below 80%, however, the lender will not advise you when you are eligible to discontinue the coverage and stop making the mortgage insurance premium (MIP) payment. I have to say, if the lenders did contact the buyers even months or years down the road regarding discontinuing their mortgage insurance premium, what do you think the buyers would think of their loan company?

I know that I personally would be recommending that loan officer to everyone that I knew would be purchasing a house. However, it is left up to you to keep a track of what is happening with your loan. To find out where you are with your loan, take a look at your most recent mortgage statement, even if you are paying electronically. The files are usually up to date. Divide the remaining principal by the original purchase price of your home. If that number is below 80%, call the lender and find out their specific procedure for removing premium mortgage insurance.

Before you do anything, remember, remember, it is the responsibility of the buyer (you) to track the debt to value ratio and make the arrangements to stop premium mortgage insurance.

I continued researching to see if there was any more information I could share with you that would help you answer this question. When I was reading the fha.gov website it actually gave more information based on the different loan amounts. Here is what I mean, it stated it you have a mortgage that is 15 years or less and the loan to value ratio of 90% and greater, the mortgage insurance premium will be terminated when the loan to value reaches 78%, irrespective of the length of time the borrower has paid the mortgage insurance premium. I want to caution you if you have a 15 year or less term, to check with your lender as to their procedures. Because I am always hesitant when terminology like “will” gets thrown around. Sometimes they don’t follow through.

Look at your statement and see where you stand with mortgage insurance payment. You might find that you can stop at this time. Follow your lenders procedure for discontinuing.