The number of FHA loan applications see through FHA loan specialists is growing…surprisingly. In fact, for some bankers, that is all they are seeing happen. Why are so many people looking into these loans? There are several reasons and it all comes down to the overwhelming benefits of FHA loans. The number of FHA loans secured in the first quarter of 20008 when up 126 percent compared to the same quarter last year. Make no mistake, these loans are only a fraction of the market share, but they are growing faster than any other type of loans out there.

Reduced Restrictions Push Numbers Up

One of the key benefits of FHA loans is the reduced down payment. This, along with the lessened credit score requirements seem to be helping. That is what people want to know. They can pay less for a loan with lower interest rates because FHA loans offer lower interest rates to borrowers with a bit more risk. They also do not have to have a large down payment, which has harmed many people in the past.

In addition to this, the government approved an increase in the amount of money that can be borrowed through FHA loans, which has drastically helped many of the country’s more lucrative investors in locations such as California where a home is double what it is elsewhere in the country. The increase moved the maximum allowed to be financed through FHA up to $729,750, nearly doubling it.

If you are currently struggling with your loan, FHA refinancing is also quite lucrative since many of the same benefits are in place. For those homeowners who took advantage of the lower adjustable rate loans a few years back and are now facing adjustments in those rates, refinancing into an FHA loan can help them stay in their home.

It is helping many people. Consider this. As reported by Chron.com, Wells Fargo spent some time working to train real estate agents on the benefits of FHA loans. To do this, they welcomed agents to movie theaters around the country, where they broadcast live training sessions. Their goal: teach agents about FHA loans in the hopes that these agents would in turn promote the idea to their interested clients. In doing so, the company saw an increase of 342 percent over 2007 in volume of loans serviced.

It’s Effects On You

FHA is an option for many borrowers. If you find yourself facing lenders who turn you away because your debts are higher than others are or because your credit score isn’t as high as it could be, these loans can work for you.

I highly advise anyone that is considering applying for a new home loan or are considering refinancing a current loan to look into FHA loans. They are not for everyone, of course, but they do offer benefits where other loans are often holding you back.

Consider the current real estate market. You have the goal of owning property. You have the goal of buying a home. You do not have a credit score that is stellar, but you have a job and are making decent money. You do not have a down payment. Although you could do very well in a home loan, some lenders will tell you no shutting the door on your dream home while just a year ago they would have been welcoming you in. That is harsh, but it is today’s reality. If this happens to you, FHA loans are more flexible and ideal for some borrowers. Do not sign on the dotted line until you have considered all options.

As for the FHA numbers being up, that is a sign that people need this organization to keep them buying homes.

The FHA is out there to help. This week, the second phase of the direct mail campaign the agency has in place will roll out. That means that some 675,000 people who are considered at risk for losing their home will get help from the agency, or at least the offer of help.

The agency will mail out thousands of letters this week to those who are going through foreclosure as well as those who are at risk for doing so, to offer help. The agency has used this method to get people back on track for their loans, and help them to avoid foreclosure. The FHA is offering a method that allows these homeowners to get into better mortgages that are safer to the homeowner (and the lender) as well as helps them to get out of the higher costing mortgages they are currently facing.

A few months ago, the organization provided the same type of help to some 280,000 people. In that batch, from February, was just the first round. They plan to help at least 850,000 homeowners by September of 2008. The letters are part of the organization’s public awareness campaign, which stresses that homeowners have options beyond foreclosure.

There has been quite a bit of talk about foreclosure being the only solution for many struggling homeowners. While many people have selected to cut their losses and run, this is highly risky. Not only do they lose any investment into their homes they have made over the last few years, but they also put themselves in a situation where they may not be able to purchase a home for some time through damaged credit and financial struggle. This FHA program is alerting those homeowners best positioned to stay in their home through new loans.

In a statement about the letters going out, the HUD Secretary Steve Preston had this to say, “This letter might be the most important piece of mail many of these families will receive this year. This information could not only help save their current home, it could help provide them with long-term financial security. This outreach campaign will ensure families are aware of the safe mortgage alternative offered by FHA.”

Who Gets The Help?

The letters being sent by the FHA are a small fraction of the help available, but those receiving the letters should take advantage of them quickly. They are headed out to those who have already faced or are currently facing their first reset of the adjustable rate mortgage they have.

If you are one of the many that will receive this letter, act on it. FHA loans are highly desirable because they are backed by the federal government, are more affordable and they are safe, unlike many of the high risk loans out there that many homeowners are struggling with currently.

At the same time, if you are unable to get the help you need, or are facing a reset of your mortgage interest rate soon, you can still get help, even if you do not receive one of these loans. The FHA is available to anyone in the United States, though there are loan requirements.

If you are interested in finding out if you qualify for FHA loans, take the first step. While the organization cannot help all borrowers, it can help those that are struggling, those getting into loans, and even some of the higher loan amounts (the FHA has been approved to lend to those homes with values up to $729,750 through the end of the year at least.)

For those that get a letter from the FHA, do not make the mistake of tossing it out. It will be the most important letter you receive.

Throughout this year, the evidence that the housing industry was suffering has been everywhere. Every time you turn around there seems to be another position on the table. A new solution, a new opportunity, a new way to fix the problem…these have all surfaced. Yet, with each one of these new situations there comes the “what if” situations.

On June 9th, the Federal Housing Administration Commissioner Brian Montgomery made a very interesting statement to the National Press Club. He said that there was his agencies just could not handle any more bad loans, which is one offer or opportunity on the table being discussed. He said, “This is a worrisome idea,” CNN reported, “FHA is designed to help stabilize the economy, operating within management, low risk loans. It’s not designed to become the federal lender of last resort, a mega agency to subsidized bad loans.”

These remarks are meant to table the discussion happening in Congress currently. There is legislation on the table that would have FHA backing up an estimated $300 billion worth of worrisome mortgages. This translates into about 2 million loans.

What is your stance? Should the government really back up these troubled loans? Are you one of the people who are struggling and would like that helping hand from the government?

The concerns go much further….

Montgomery went on to list various reasons why this type of scenario would be troublesome, saying that it would weaken the FHA situation badly. In his own words, Montgomery said his agency has been, “hobbled by low loan limits and higher down payment requirements.” He continued adding that his agency, “was priced out of some housing markets.”

Credit and FHA Standards

One aspect of this entire situation that is new is the way FHA is currently looking at their potential borrowers. For the first time in the agency’s 74 years, it is now pricing loans according to the risk level the borrower possesses, which could be risky for some of today’s FHA borrowers.

Doing this is often believed to be worrisome. It implies that those that have high FICO scores would get the lower rate, while those who are more at risk with a lower FICO score would be a higher rate. What is unique about this is that many people jump in here and claim that this would actually hurt the industry, after all, are not the people who need the most help being charged the most?

According to Montgomery, that is not the case. In fact, he said, “Contrary to conventional wisdom, FHA families with lower incomes have higher FICO scores.” He says, “These are hard working American families who live within their means and pay their bills.”

This would imply, then, that FHA is helping those with lower incomes to get into the homes they want because they are better credit risks than those with a bit more income and lower FICO scores.

What About You?

What situation are you in with your FHA loan? Are you hoping that the government offers more programs to help you get out of the loan or into one that is better protected? As a homeowner, you can wait around until the government makes decisions, or you can put the future of your home in your own hands. Various FHA loan programs could be beneficial to you are already available. Many people will qualify for help under the current program offered, which means that you could save your home loan even if you are currently facing trouble now.

I highly recommend that you invest the time into finding an FHA solution for yourself, instead of letting the government battle it out.

In recent weeks, there has been a lot of destruction.  Much of the south and central portions of the country have been ripped apart by devastating tornados.  Floods, hurricanes, earthquakes and terrifying thunderstorms have left a path of destruction across much of the country.  Homeowners are barely able to find shelter and yet many are fearful of what will happen to their home’s mortgage. 

For many people who have FHA insured loans, there is some relief available.  According to the guidelines of most FHA loans, the lenders are not able to press you for payment in such circumstances.  They cannot file for foreclosure on your home until a fully 90 days has past.  This gives you time to get things back into place, at least financially speaking, or to find another option.

If your home had damage or destruction, this type of FHA loan backing can be quite helpful (perhaps yet, another reason to consider FHA loans over other types whenever you qualify.)  Now, not all thunderstorms will qualify for this type of help.  It is meant to be in use in only a handful of the worst situations.  Areas that the President has declared to be a disaster area are those that will qualify for this relief.

In addition to this, if your place of employment has been damaged or destroyed at the hands of such weather occurrences or manmade events (like wildfire for example) you too may qualify for such protections even if your home hasn’t been damaged at all.

The FHA insurance on your home is there to help protect you from losing your home, but you still need to talk with your lenders and get into the necessary programs.  Because most lenders are more than willing to keep a good paying customer in their current mortgage, they are likely to have some solution for you.  This can drastically help them save you as a customer and the FHA programs are there to help provide reassurance.

If you believe you may qualify for this type of backing, contact your lender today.  Find out if your particular situation qualifies.  You can also contact your local HUD offices to learn more about the help that is available to you here.  Chances are, there is protection available o you through your FHA loan.

We’re nearing the end of our First Annual “Best Real Estate Blog” Contest.  Sunday, June 1 marks the end of the voting.  We will be officially announcing the winners of the popular vote, editor’s choice, and random drawing awards next week.

I have yet to receive any entries for the Real Estate Blog World addition to our contest.  It’s disappointing but we understand you may be too busy to attend a conference or write your thoughts on FHA mortgages.  Keep in mind we will be giving away 3 passes in June so you still have the opportunity to win those!  All you have to do is write a post detailing your opinions on FHA mortgages and email it to me (brandon at fhamortgagecenter dot com) and you will automatically be entered for a free conference pass.  At this point, if you write anything you’re one of the winners–so go for it!

Thanks again for all of the support in our networking efforts and please contact us if you ever have any FHA mortgage questions/issues.

Wait just a minute. As I am catching up on all the various news in the home ownership arena, I had to read this story to see if it was going to tell me anything new that I did not know. Well of course it did. Title was Foreclosures Hit an All Time High. Well you better believe this is an all time high. Look at the subtitle below:

Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on their payments. Stop the press – 900,000 borrowers. Before long that number will be over a million. Up 71% from a year ago wow! WOW! So how many of those people are getting help. Have any of these people tried to go into a FHA Loan of some sort? Remember there is the FHA Secure or any other FHA product.

There are clearly more people fighting the FORECLOSURE battle than initially suspected. I would even go so far as to say probably everyone knows at least one person that is facing foreclosure and that person knows someone. We have all heard of six degrees of separation which I continue to find out that is true and somewhat maybe even less than that.

Imagine for a moment if you will, I want to add the Colorado Rockies to this analogy because last year they made it to the World Series. Okay, let’s imagine that there are three men on base and there is a guy up to bat. The guy at bat is thinking if I hit a home run, everyone will go in. Bases are load and the first ball is thrown. It is clearly a ball. The second ball is thrown and it a strike. Everyone on the bases is thinking this guy has a history of hitting home runs. The third ball is thrown and he hits a homerun. It is so far out of the park the other team could not even think about trying to catch it. Think about this happening 900,000 times for all those borrowers that are losing their home.

Maybe they were on base 1 and attempted to contact someone before they became behind the first time. Well nothing happened. Then they made it to second base and became behind two months. Since no one contacted them they did not roll the dice. Then they got to the third base and became behind more than two months. Then they reached that crucial month and now it is too late. They are facing foreclosure. They just became one of the 900,000.

What you have to say to yourself is you do not know all the different situations that have led up to the foreclosure for these homeowners. It could have been job loss, health issues, predatory lending or something else. I want to say brace yourself because I believe those numbers are going to continue to rise. We have not even seen the worst of these headlines. Every day clearly someone is facing a choice that they do not want to make regarding housing.

Dr. Taffy Wagner

As I was reading more about the housing industry, I discovered that approximately a week ago E-Loan announced that it is going to offer FHA Loans to help millions of customers in this ever increasing tightening credit market. I can just see people now, getting online and going to e-loan and completing an application. We have all read about home values are declining all across the nation. This will give home owners the opportunity to keep their piece of the American Dream.

I applaud E-Loan fully for providing this opportunity to these millions of families. We all know what FHA has to offer such as lower down payments, the downpayment can also be gifted from a relative, they have borrowers from all across the credit spectrum and even more. Let’s face it, even with those few qualifications there are more people that should be able to qualify and get the desired assistance they are looking for.

Every day someone is facing impending foreclosure due to a lack of information, help and even fear of talking to someone about their financial situation. One thing that appears to me is that with E-loan you do not have to physically face a person and should be able to get the majority of this handled through an online source. I have to say this because I remember when I was dealing with difficulty in my finances and the last thing I wanted to do was talk to someone face-to-face that was near and dear to me because it hurt. It was easier to talk with someone who did not necessarily know me and there was no judgment being passed.

FHA Loans are available on many different levels – not only can the first time home-buyer get a FHA Loan, there are also products for people who are refinancing, FHA Secure and more. I strongly recommend you go through this blog and see the different products that FHA has to offer. The answers could literally be within your reach and you miss it because you are not taking the time to review each area. Take a deep breath and sit down and read all the information.

Let me give you a prime example of what I mean. I had a colleague share with me the other day about a foundation that could be of some interest to us on a project we are working together own. When I went to their website, I was very impressed and share with the colleague we should definitely speak with them. Tonight, I was looking through some of our local papers and community papers before throwing them away. Little did I know, when I was going through our community paper that same foundation was in there about them beginning a chapter in our neighborhood. That information was printed over a month ago but because I did not read the paper when it came, I did not have the information. Now that I know about them, sure it adds some credibility and I have to think maybe we were not ready at that time to get the information.

I am saying that to say, maybe you have looked at FHA information before and did not see how it worked into your situation. Stop and take the time to review it again and maybe your eyes will be opened.

Dr. Taffy Wagner

I finished my last blog sharing about Senator Clinton’s housing plan and discovered that Senator McCain’s was out. So I decided to go back and also include his proposed solutions. Once again this was taken from Mortgage Daily News.

He restated the history leading up to the current situation and placed the blame for the crisis on:

1. Speculators who moved into the housing market during the bubble and overwhelmed normal market forces with rampant speculation.
2. Lenders who became complacent because of the sustained period of rising home prices and consequently failed to maintain their lending standards.
3. The explosion of complex financial instruments that were not well understood even by sophisticated investors and were largely off-balance sheet and hidden from scrutiny.
4. A crisis of confidence arising out of initial losses in the market which has caused banks to no longer trust each other and credit to dry up.

Calling it “straight talk,” Senator McCain said, “I will not play election year politics with the housing crisis.”

“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.

The Senator said that no assistance should be given to speculators and that any aid should be limited to homeowners and their primary residences, must be temporary, and not reward people who were irresponsible at the expense of those who weren’t. “I will consider any and all proposals based on their cost and benefits.”

His most specific proposals include:

1. Reforms to the system including transparency and accountability. Homeowners should be able to easily understand the terms of their mortgages and in return should provide truthful financial information and be subject to a penalty if they do not.
2. Lenders should be held accountable for the quality and performance of those loans and strict standards should be required in the lending process.
3. The Senator said he opposes proposals to reduce the down payment requirement for FHA mortgages and that, as conditions allow, the existing down payment requirement should be raised.
4. Financial institutions should be encouraged to increase capital reserves to serve as a buffer against losses. Methods of encouragement should include removing regulatory, accounting, and tax impediments to raising capital.

These four, the Senator said, would be the principals against which he would examine and evaluate new housing proposals.

I have read his proposal and I have a question I want to ask the readers. When I read number 1 where he talks about reforming the system. He goes on to talk about homeowners understanding the terms of their mortgage and if not there should be a penalty. I want to ask the readers their thoughts on that? Send them in. We want to hear your thoughts and answer your questions.

Dr. Taffy Wagner

Is there any doubt to anyone that if people cannot keep up with their mortgage, it would spill over into other areas? If people are delinquent on their mortgages, you better believe that it will spill over into credit card payments and even auto payments. People do not become delinquent to become delinquent. That can mean several things (1) employment could have changed; (2) a husband and wife could have divorced and the person who keeps the house is not able to afford it; or (3) over the last few months they have really been trying to keep everything together but with the adjustable rate – adjusting they are not able to keep up.

The inability to keep up with the adjustable rate has spilled over into their car payment. The first time they are not able to make their car payment, they do not feel as bad because they already believe they will be able to catch up in the next couple of weeks. So the first time, they are actually accepting this happened. But the third time it happens, they are in a panic situation because they realize this is not the only bill they can no longer afford. The mortgage has turned into such a nightmare, they are desperate for resolution.

When you become desperate for resolution you do not see things as clearly as if you were level-headed and calm. You open yourself up to be taken advantage of and making unwise decisions. When I saw this story last week about the mortgage market having an actual melt down, I could not wait to see what was happening. Apparently as we all knew it, foreclosures is not over. Federal Reserve Chairman Ben Bernanke continues to pledge to do all that is possible to help struggling homeowners. Many people already think we are on the verge of a recession.

I have to tell you it seems that so many things are upside down, will homeowners truly be able to be helped. I continue to look in my neighborhood and more houses are having for sale signs in the neighborhood. Even those homes that I thought everything was okay, leads me to wonder why those homes are now for sale. It is because they are trying to get out before their homes no longer have any value or is it a job transfer? What would you think.

Bernanke shared which we already knew, “abusive, unfair or deceptive lending practices led some borrowers into mortgages that they would not have chosen knowingly.” What is the solution to this. Many are still feeling deeply the consequences of these lending practices. One of the bad parts is that these consequences are far reaching and could reach to the generations versus just the parent, aunt or uncle that is currently dealing with this.

When I said domino effect, sure it affects other items that must be paid on, but it can also affect a youth when making choices based on what they saw growing up.

Dr. Taffy Wagner

Is this supposed to be a surprise to anyone seeking to get a loan in this housing market? Seriously because almost day after day we are reading increasing stories on the number of foreclosures, the mortgage rate and even lenders. Maybe the actual fact the guidelines are being tightened is not a surprise but what they are saying is. I must admit I was stunned to find out this was happening.
I read a story that came out of Ohio that shared how the guidelines are being tightened on mortgage lending. It shared that basically due to the sharp increase in foreclosures nationwide, Fannie and Freddie are implementing tighter underwriting guidelines on approving a family for a home loan. Some changes are significant and have begun to take lenders, real estate agents and prospective homeowners by surprise.
I want to share a few of these that I know will affect homeowners: one of the biggies I would believe would be the Appraisal Guidelines. Why, because with the market being soft there is not in my opinion any way that your home could appraise at the same value today in 2008 that it might have appraised for at the end of 2006 or beginning of 2007, especially with homes in your neighborhood or area that have been foreclosed on. Foreclosure affects home owners that are not facing foreclosure because the number of foreclosures in the neighborhood brings down property value.

I remember when we were selling our home, we had the standard walk through appraisal. Now it seems, in addition to the standard walk through appraisals by a licensed appraiser, lenders now are requiring an automated valuation model which is statistical data from all the real estate sales that have taken place in that specific area. The rule now says whichever value comes in less will be the true market value. It goes on even further to say if the assigned appraiser declares your home to be in a declining market or should the new automated underwriting track your property as an area deemed to be in a declining area, the buyer cannot get 100 percent financing. I know that will affect some people.
We know that one of my favorite subjects is credit. Apparently it is one of the topics of discussion here as well.

From what I can gather, Fannie Mae and Freddie Mac’s major changes take place in March 2008 affecting how conforming mortgages are priced with an interest rate. The new guideline will (not optional) require lenders to review credit scores and down payment information before a mortgage rate can be offered. New interest rate adjustments will apply to high loan to value, low scores, cash out refinances and investment properties. Once again, credit score is important. A point that I found interesting was at the end of this story it said these changes have not affected programs from The Federal Housing Administration. In an FHA mortgage loan, the mortgage insurance is provided by the borrower and included in the loan. As I have said in previous blogs, do your research. Talk to a lender and see what your options are. If you are strictly seeking an FHA Loan, know that all lenders are not FHA approved. I cannot stress doing your due diligence enough.

Dr. Taffy Wagner