Reader Gerald asked, Does either of the packages address whether or not PMI will be required with deposits of less than a certain percentage, and what would that percentage be?

Actually, FHA loans do not use PMI, but rather mutual mortgage insurance (MMI). MMI is made up of an upfront mortgage insurance premium (MIP) and monthly mortgage insurance (MI).

The upfront MIP is required for all borrowers with less than a 20% down payment. On a 30-year fixed-rate loan the MIP is 1.5% of the total loan amount. Any unused portions of the MIP can be refunded within 84 months of loan term (7 years).

The monthly MI is .05% of the total loan amount per year. Borrowers who put down at least 10% on a 15-year loan are exempt from paying monthly MI. For the rest of borrowers paying monthly MI, it is cancelled after 78% of the principle has been paid off. For this cancellation to happen, borrowers must have made all MI payments on a 30-year loan for five consecutive years.

Last night, President Bush mentioned FHA in the first 15 minutes of his State of the Union address. Along with reforming Fannie Mae and Freddie Mac, the president urged congress to move the FHA bill through Congress. Let’s hope this national urging lights a fire under Congress!

I must share that as I have been interviewed for online radio shows these first two weeks of the year, the topics have been about credit and getting out of debt. That is understandable and it also leads us to discussing the housing market. So many people have been affected and people look forward to a new beginning, for some this is not happening. As a matter of fact their situation has gotten worse. For example, not only are people having a hard time paying their bills now it appears they are beginning to fall behind in paying their credit card bills.

Let me share that I am one of those people that always look forward to a new beginning with very realistic goals. I tell you if you are a person that already has a hard time paying credit card bills at the onset of the year, it is time to take action. There are many financial situations to really look at such as housing, gas (which has continued to increase) and the cost of food has not declined. I remember once as I was going through a drive thru to get some lunch for our kids and the lady working the window was fussing about the cost of food increasing but not her salary. This is a situation many people are facing. They seriously have to choose which bill to pay.

We have all heard I am robbing Peter to pay Paul. So what do you do with finances as you begin the New Year? One of the things I recommend is write down all of the bills you have to date. Second make a commitment to yourself to not add any new bills and get the current bills in a manageable state. Why do I say this because if it has gotten really close to where you almost could not pay your mortgage, it is imperative that you evaluate your needs and wants. I strongly recommend cutting the cable off and getting rid of the cell phone. Look at the rules for the cell phone and make sure you know what the rules. Different cell phone policies have a disconnect fee. Look at everything.

I read an article where Capitol One started reporting a rise in delinquencies. American Express reported an increase in late payments whereas they have been known for customers with excellent credit. When there are issues with mortgage payments, there are usually other financial obligations that end up in the same situation. I ask that you do not beat yourself up, but figure out a realistic plan for you and your household.

What I have shared with these interviewers is do what needs to be done in order to reduce and eliminate debt. Once this happens you will see how other areas of your life begin to clean up as well. You might find yourself give 110% at work versus 75% because you were concerned about money. Now you can freely excel in your job. If your health had begun to deteriorate and you free up some of the debt, you will find your health getting in order. Do not take this lightly. Now is the time to establish a DOABLE plan and WORK your plan. I wish you financial happiness.

Dr. Taffy

The recent economic downturn may have at least one advantage: pushing along passage of FHA modernization. The Financial Times reports that Senator Chris Dodd is seeking a long term economic stimulus plan that he feels must include getting an FHA reform bill passed. Dodd has also suggested the government buy mortgages from home owners in trouble. Dodd plans to meet with Representative Barney Frank to try to straighten out the differences between the House and Senate versions of the bill, which has been keeping this at a standstill.

Mr Dodd said he would meet Barney Frank, House financial services committee chairman, on Thursday “to talk about how we can reconcile these two bills, so that it could be a part of the stimulus package as well”.

“I want to get beyond just [tax] rebates … If this is in fact a [mortgage] foreclosure crisis then we need to be doing something if we can about the housing issue,” Mr Dodd told reporters.

Let’s cross our fingers that things will get moving along and FHA reform can become a reality!

As some of you may have checked out, one of our links is to a downloadable FHA Guide. It has been updated this month and I wanted to give everyone a head’s up. The updates include:

Lots of helpful information.

We all know that a lack of knowledge can lead to poor choices, uninformed decisions that lead to long term consequences. What is even worse is when businesses choose to prey on those that are uninformed for their own gain. From what I read today, there was a report released by the United for a Fair Economy (UFE) advocacy group that stated subprime mortgages, home loans issued to Americans with scant finances, were “ruthlessly hawked and that a “solid majority of subprime loan recipients were people of color.”

It is sad that in the year 2008, that we are continuing to deal with the issue of minorities being taken advantage of instead of being helped and educated. It is evident that this crisis has ruined communities as well as families and is continuing to do so. Is there a light at the end of the tunnel? Who could actually say because mortgages are continuing to adjust for those that got the adjustable rate mortgage. Some will be fortunate to be able to qualify for the FHASecure but everyone will not fall into this category.

For those that do not qualify for FHASecure, they have to weigh what other options are available. The report estimated the total loss of wealth “for people of color” including Latinos to be between 163 and 278 billion dollars for subprime loans taken out during the past eight years. What does that say to you? To me it says let’s keep the poor, poor and the wealthy wealthier thinking they will not know the difference. Surprise, this is out in the open and the nation knows what has happened.

As a matter of fact, some of these same lenders probably are no longer in business because they could not operate in this morning. So it affected them as well as the people they were taking advantage of. I do believe and advocate more should be spent on educating people prior to home ownership so that it is a benefit for all parties and not just the lender.

The effect this is having on communities is astronomical. Having a lot of foreclosures in a neighborhood also brings down property values. I have seen houses staying on the market as long as a year or more without even a showing. Then owners are taking their house off the market. I have heard that some of the houses that were foreclosed on being absolutely torn apart when the new owner moved in. They spent a lot of time repairing the homes to make them livable which ends up costing money.

Something I recommend for anyone in the housing industry, whether realtor, mortgage broker or even housing counselor increase the amount of information you are giving to your client. This is going to make the difference between a dream for them or a nightmare. I continue educating people as often as I am asked. I do not want anyone struggling and lose their dream of home ownership. Sure at the end of the day it is their choice, but have you done all you can do to give them solid information. This could be someone in your family seeking information.

Dr. Taffy

I have to say that I cannot say I am surprised in the least. Foreclosures have affected literally every state. Look at the news or read the newspaper. As the saying goes, it gets worse before it gets better. Are you asking yourself, what could I possibly mean? Let me explain what I mean. Last year every time we looked at the news, there were stories about foreclosures. There was also many stories about how mortgages were being discussed on the hill because there was too many people caught up in foreclosures. Do you think all of the adjustable rate mortgages adjusted last year? Don’t because they have not. That is why we have different options being presented such as the FHASecure and other FHA options.

Based on a story I read today, saying that a month after the Bush administration announced a plan to help troubled homeowners, one foreclosure agency needs help of its own. That is right it is overwhelmed and inundated with phone calls. I must applaud consumers that have basically taken a stand and said I need help. I want someone to help me in this situation and not continue it. They went from approximately 1500 calls per day to 3000 per day. This is the Consumer Credit Counseling Service of Greater Atlanta. They plan to hire about 130 new staff members. I must ask you if you are presently understaffed how many people go each day without the answer they need.

I say that because, I have to wonder if there are people that waited until the last minute and they are now in a do or die situation. I encourage those who are calling the foreclosure hotline to continue to call until you get the answers and direction you need. Here is an idea – if you are in the
Atlanta area, maybe you could apply for a job at the Consumer Credit Counseling Service. If they need help, they need help and could provide some training. I am not in the
Atlanta area so I do not know the specifics; however what is the worse thing that could happen. They say no! You will never know until you ask the question.

Let me share how busy they are – see this is exactly what I was talking about in the above paragraph. I went back and looked at the article; it shares that due to this agency receiving such a huge increase in calls it had to limit its services only to customers who were delinquent on their mortgage payments, then referring other customers who were not delinquent to their lenders. Were some of those customers calling because they could not get through to their lender? Does make you say hmmmmm.

If you are in a situation and need answers, do not forget that persistence and patience pays off. Take the time to make the phone calls and get through to someone who understands your specific situation. Remember you are not alone and it appears that the foreclosure hotlines are overwhelmed with callers. Think about how they feel not being able to get to everyone each day. When it is your turn, thank them for listening to you and providing some sound guidance. There is something to be said for a person having even phone etiquette no matter how dire the situation.

Dr. Taffy Wagner

I recently received the following question from reader Sandra:

The average home price where I live is $525,000. Will FHA ever raise the loan limits, so that areas that have a higher average price can utilize the program? Also what is the required down payment? I had recenly heard that it was to be reduced from 3% to 1.5%

As for now, FHA loan limits aren’t going to be changing. However, current legislation (HR 1852, which has passed in the House) includes an amendment proposing the loan limit be set at lower of either

This bill may be combined with a Senate bill, but both seek to increase loan limits to make FHA loans a realistic option for more buyers. As for the down payment, it is still a toss up as to what the agreed-upon change will be. Although nearly all legislators seek to remove the 3% down payment, there is disagreement on whether it should be zero down or the 1.5%, which could be packaged into fees. In my opinion, the 3% isn’t terrible (look where a lot of the subprime borrowers who didn’t put up any cash ended up), but a lower down payment could certainly make homeownership possible for many more Americans. I’d predict that in the next 6 months or so the 1.5% will be the new minimum.

Thanks to Sandra for the question! If you have a question, please leave it as a comment or send an email to admin@fhabook.com

Over the last couple of weeks, I have steadily been keeping up with the news on mortgages and what is happening in the industry. Let’s give a brief recap because no matter what you read, you are going to find that many copies are returning to offering FHA products as a part of their equation. I honestly cannot blame them because there are so many people dealing with situations that they didn’t even know they would face. Consequently, they need viable options and FHA provides realistic solutions.

As recent as yesterday, I read that Sun West Mortgage Company has launched a web-based training series, its free and on comprehensive FHA and reverse mortgage. As a person that has taught web-based training, it is a huge advantage and allows many different people to attend that otherwise might not have the opportunity.

I must applaud them for being one of the companies that steps out and offers this program in another format. Mortgage professionals can schedule themselves for the class and even without knowing the details of this class; I do believe that it should be researched. Find out the ins and outs of the different classes and how it can benefit your career as you are in a position to help many homeowners.

I read another article that stated Green Valley Mortgage in Bloomingdale recommends if you are a first-time buyer to consider an FHA mortgage. The senior loan consultant for Green Valley Mortgage outlined some of the requirements for an FHA loan. When I read there are some down sides and one of them being that the mortgage must be $275,200 or less it made me want to stand up and say — choose a starter home and do not focus on your dream home. You will set yourself up for success versus failure if you begin with a starter home. Depending on the area where people want to live, you should be able to find a starter home within the parameters of an FHA mortgage.

The next topic that continued to be discussed was reverse mortgages. Understand that the reversed mortgages are being offered to the older home owners. What I wasn’t aware of and you know how much I love learning is there are three types of reverse mortgages. The types are FHA-insured, lender insured and uninsured. As with anything, the parameters are different for each. Research, research and more research. Even with an older home owner, especially if this is an elderly parent, I would also recommend they in particular talk this option over with an adult child or even a lawyer to make sure that you are not being taken advantage of, nor going to lose your shirt because you did not foresee a situation.

Whether you are a first-time buyer, someone who seeking options to avoid foreclosure or even an older home owner looking at options, FHA offers many solutions that should be considered. If you do not fit into one category that does not mean another option is not available. As I have stated throughout, do your research and find out what is best for you. It is a new year and let’s make better decisions.

Dr. Taffy Wagner

This is a bit of news that I believe the readers should know about as well. Even though the majority of the blogs written here provide information about FHA and also some current news, it is just as important that you are aware of some other aspects of the mortgage industry. Why? Because I believe that some of what I am about to share you could already know or this information is going to give you insight into what could have happened to you.

I was talking with my brother about my blogging and he said did you see this article about mortgage fraud. I asked him what he was talking about and he basically gave me the gist of it – there are so many mortgage fraud cases filed that the officials that prosecute the cases cannot keep up. So I took the time and did some research and found out that banks filed 47,717 cases this year which is up from 21,994 two years ago which was according to Federal Bureau of Investigation and Financial Crimes Enforcement Network of The Treasury Department. What does this say to you? This says to me that people were clearly being taken advantage of by people in the mortgage industry.

Understand this before you get all in an uproar, I am not saying everyone in the mortgage industry was bad. What it says is that you must be careful and do your due diligence before hiring a realtor, mortgage broker, banker or lender. As a matter of fact, in every area of your life, you should do your homework and background checks. Let me give you a prime example, I recently received a letter in the mail from a company that read about me on a press release. They contacted me basically throwing out some names that I would know. I finished reading the letter and put it aside. I had decided that after a couple of days, I would do some research on the internet to find out about them. After doing my research, I had found some very derogatory information that was recent from several different people. I was very proud of myself for not being too eager to jump right into something without having done my homework.

Look at these numbers as well because when I say numbers are going up, they are going up. I remember last month there was an article that said the number of foreclosures filed here had already topped last year’s filing in November. For any of you that have followed
Colorado’s foreclosure being in national news as #1 in the nation for foreclosure during the past year. So I am sure even where you are, the foreclosures have made record numbers.

If mortgage fraud is up, then it almost stands to reason why there are tons of foreclosures. Does make you say hmmmm. It did for me because that has to be a part of it. Once again even if you are facing foreclosure, thoroughly read all your paperwork.

Taffy Wagner