Richard's Real Estate Thoughts - Chattanooga TN Mortgage Lender: January 2012

FHA points to reduced seller concessions

FHA yesterday announced plans to increase lender requirements and to consider reducing allowed seller concessions.

The first announcement was about increased lender requirements which may lead to some further tightening in lender underwriting standards.

More significant for most consumers is the announcement about the renewal of plans to "reduce the maximum allowable seller concession from its current level to one more in line with industry norms."

This has been under consideration for a couple years or so. It was part of the reforms that were discussed in 2010 by then Asst Secretary David H Stevens.

"We are also proposing a third policy measure to reduce the maximum permissible seller concession from its current 6 percent level to 3 percent, which is in line with industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value."

The new announcement does not indicate a proposed level for seller concessions and it does not provide a definite time frame.

The biggest impact if seller concessions are reduced will be felt at the lower loan sizes. Seller concessions of 3% cover most of the closing costs for loan amounts over $150,000. For loan amounts under $100,000, buyers will see their required funds to close increase significantly. Or they will pay a higher rate in order to fund some of their loan costs in their interest rate.

FHA lending has seen numerous changes over the last few months. One of the most sigificant impacts on consumers has been with a series of increases in the monthly mortgage insurance premium.

 

FHA 30 Yr MMI Rates

 

Premium

MI Payment for

$150,000 Loan

 

 

Since April 2011

1.15%

$143.80 monthly

 

After Oct 2010

.90%

$112.50 monthly

 

Before Oct 2010

.50%

$62.50 monthly

 

Another of the changes discussed in the proposals made in 2010 was an increase in the minimum downpayments to 5%.  Fortunately, I have not seen anything further on that.

Please leave your thoughts on this possible change. There will be a comment period announced when the specifics of the proposed changes on seller concessions are published.


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Richard Smith
NMLS# 184479 TN# 104002 GA# 28928 

Conventional, FHA, FHA 203k, HUD $100 down purchases, VA,

Rural Development ( USDA), and Jumbo Loans


Lending in Chattanooga, Tennessee and Georgia for over 20 years.

Sierra Pacific Mortgage

Cell phone: 423-280-0345 Email: Richard.Smith@SPM1.com

Visit my website to inquiry about a home loan.

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This blog represents the opinions of Richard Smith. The posts and comments written on the blog do not represent the opinions or positions of Sierra Pacific Mortgage. 

Comment balloon 3 commentsRichard Smith • January 21 2012 02:07PM
FHA points to reduced seller concessions
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FHA yesterday announced plans to increase lender requirements and to consider reducing allowed seller concessions The first announcement was about increased lender requirements which may lead to some further tightening in lender underwriting… more