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Real Estate

FHA Mortgages Are Poised To Get More Expensive

Logo of the Federal Housing Administration.
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The Federal Housing Administration (FHA) plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future.  The FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchases across the board.

Making sense of the story

  • One reason for the increase in fees is that over the last six years, the number of FHA loans used by buyers has increased significantly.  The housing program is financing 40 percent or more of all new-home purchases in some areas and is a crucial resource for first-time buyers and moderate-income families.  This is especially because of the low 3.5 percent down payment required for most FHA loans.
  • During this span of rapid growth, the FHA’s insurance fund capital reserves have steadily deteriorated – far below congressionally mandated levels.  And delinquencies have been increasing.  As a result, the FHA is under the gun to get its own house in order, cut insurance claims, and rebuild its reserves.
  • Under the changes, the FHA will lower its seller concession cap to 3 percent of the home price or $6,000, whichever is greater.  Currently, the FHA allows up to 6 percent of the price of the house to go toward buyers’ closing costs.
  • Beyond that change, the FHA also plans significant increases in insurance premiums – upfront premiums will rise to 1.75 percent from 1 percent, effective April 1, and annual premiums will increase by 0.1 percent on all loans under $625,000 and 0.35 percent on mortgage amounts above that, effective June 1.

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Real Estate

Mortgage Settlement Could Lead to More Scams

The recent announcement of the $25 million mortgage settlement between five major banks and state and federal government officials was probably welcome news to many people in the real estate business. But it has at least one downside: It will probably cause a rise in scams targeting borrowers seeking assistance.

Currently, between $4 billion and $6 billion is lost each year due to borrower-assistance swindles, says Joanne Kerstetter, vice president of education and community relations for Money Management International, a credit counseling service based in Sugar Land, Texas. Those numbers could go up over the next few years as scammers take advantage of the mortgage deal in their schemes.

“They’ll use government terms,” Kerstetter says. “They’re going to sound very official, as if they’re part of the settlement.”

Also, some of these scammers will guarantee access to borrower assistance funds. That’s a major red flag, she says. “Generally speaking, the advertisements that say, ‘Call us to get money,’ are not representing organizations officially involved with the settlement,” Kerstetter says.

In general, consumers should be wary of any company that reaches out to them with unsolicited offers of assistance. If they need help, they should contact their lenders or a financial counseling agency certified by HUD, Kerstetter says.

“The important thing is not to release any contact information to anyone who approaches you,” she explains. “Don’t sign anything unless you’re clear about what you’re signing and that your mortgage lender is involved in the process. If you’re making payments, make sure they’re going to the loan servicer or mortgage provider.”

By Brian Summerfield, REALTOR® Magazine

Read More

What You Need to Know About the Mortgage Settlement

4 Ways to ID Borrower-Assistance Scammer

 

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For all your real estate needs:
Call or email now

John J. O’Dell
Broker/Owner
O’Dell Realty
(530) 263-1091
jodell@nevadacounty.com

DRE# 00669941

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