FHA’s Energy Efficient Mortgage program (EEM) helps San Francisco (SF) Bay Area homebuyers or homeowners save money on utility bills. This is done by enabling them to finance the cost of adding energy efficiency features to their house as part of their FHA insured loan.
EEMs recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. FHA EEMs provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The borrower does not have to qualify for the additional money and does not make a downpayment on it.
Eligible Activities:
EEM can be used to make energy efficient improvements in one to four unit existing and new homes. The improvements can be included in a borrower’s mortgage only if their total cost is less than the total dollar value of the energy that will be saved during their useful life.
The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.
The energy improvements are installed after the loan closes. The lender will place the money in an escrow account. The money will be released to the borrower after an inspection verifies that the improvements are installed and the energy savings will be achieved.
If you are looking for an FHA approved lender in Bay Area who could offer more information on FHA EEM program and other loan programs, please contact me at shashank@arcuslending.com
FHA delays HVCC for San Francisco (SF) Bay Area Home Loans until February 15, 2010. FHA announced today that the enactment of Appraiser Independence has been delayed. This was originally planned for a January 1, 2010 implementation.
On the lines of HVCC, the FHA policy prohibits mortgage brokers and commission-based lender staff from the ordering the appraisal or communicating directly with the appraiser at any stage during the transaction. Since implementation of the Home Valuation Code of Conduct (HVCC) for conventional loans in May 2009, many challenges and difficulties with appraisals have been reported, such as low appraisals, inexperienced appraisers, out-of-area appraisers unfamiliar with a local neighborhood, and problems with Appraisal Management Companies (AMCs).
Bay Area first time home buyers who are planning to avail of FHA home loan would definitely welcome this move. HVCC moratorium bill is also being considered by the congress. If passed, this bill will provide a moratorium on HVCC for 18 months.
If you are a First Time Home Buyer in Bay Area looking for an FHA purchase loan you may like to start the process before February 15th to avoid getting into the HVCC hassle. Contact me to find out what are the loan requirements for an FHA Loan in Bay Area.
Related Post - FHA implementing HVCC
Short sale is increasingly becoming a common option to sell a house in San Jose and rest of the San Francisco (SF) Bay area. A short sale is a transaction where a seller sells the property for less that what was owed. If you went through a short sale you could have this question - Do I now qualify for a loan? FHA recently came with a guideline on this question. Below are the highlights:
You are not eligible for a new FHA mortgage if you pursued a short sale agreement on your principal residence simply to
- Take advantage of declining market conditions, and
- Purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
However you could be considered eligible for a new FHA-insured mortgage if
- You were current on your mortgage and other installment debts at the time of the short sale of your previously owned property, and
- The proceeds from the short sale served as payment in full.
If you were in default on your mortgage at the time of the short sale you are not eligible for a new FHA-insured mortgage for three years from the date of the short sale. Lenders may make exceptions to this rule under certain circumstances.
This guidance is effective immediately.
Related post - FHA Loan requirements for San Jose and Bay Area
If you had a short sale and would like to find out what are your options with regard to buying a new home contact me. I will be glad to explore all options for you.
Photo courtesy www.Photoxpress.com
Federal Housing Administration’s (FHA) today announced single-family loan limits for San Jose. These loan limits are effective for loans with credit approval issued on or after January 1, 2010 through December 31, 2010.
- One-Unit $ 729,750
- Two-Unit $ 934,200
- Three-Unit $ 1,129,250
- Four-Unit $ 1,403,400
These loan limits are also available for the counties of Santa Clara, San Mateo, Alameda, Contra Costa and San Francisco.
Home Equity Conversion Mortgages (Also called Reverse Mortgage)
- The national FHA loan limit for HECM in 2010 remains at $625,500 (150 percent of the national conforming limit).
Complete schedules of FHA mortgage limits for all areas, forward loans and reverse mortgages, are available at https://entp.hud.gov/idapp/html/hicostlook.cfm.
Effective immediately, FHA has rescinded the second appraisal requirements for properties located in San Jose and rest of the Bay Area (Considered declining markets). For Bay area borrowers where loan amounts can generally exceed $417,000 2nd appraisal requirement was a problem on 2 counts:
- Increased fees towards appraisal (2 appraisals hence double the fees)
- Danger of loan getting declined or loan amount reduced if the value of the second appraisal came lower at the last moment
The 2nd problem was a bigger risk if the borrower had removed his/her appraisal or loan contingency. It could potentially result into loss of earnest money deposit. The new rule would make it easier for borrowers to bring in the minimum down payment of 3.5% even if the loan amount is >$417,000 and not worry about 2nd appraisal.
Here are the highlights of the new rule:
- For properties located in declining markets, FHA no longer requires second appraisal for loan amounts greater than $417,000 and LTVs greater than 95%.
- Cash-out refinance transactions no longer require second appraisals for loan amounts greater than $417,000 and properties located in declining markets.
- Effective for all FHA loans registered on or after Monday, November 30, 2009, some lenders may still require an appraisal from a lender-approved appraisal management company when any loan amount exceeds $417,000 and the property is located in a declining market. However, a second appraisal will no longer be required.
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This update contains the temporary changes to the FHA Condo Approval Process for San Jose and rest of the Bay Area as outlined in Mortgage Letter 2009-46 B.
Here are the 6 things you need to know about these changes:
1. These temporary changes are effective on December 7th, 2009 through December 31st 2010; except for Spot Loan Approvals.
2. Spot Loan Approvals will be eliminated as of February 1st, 2010.
3. FHA loan concentration may be increased to 100% if the following criteria are met: a. Project construction has been 100% complete for at least 1 year, b. All units have been sold and no single entity owns more than 10% of the units, c. Project holds 10% of the budget in reserves for capital expenditures and deferred maintenance, d. Control of Home Owner’s Association has been transferred to the owners, and e. Owner-occupancy is at least 50%.
4. FHA requires a 50% owner-occupant ratio but bank-owned units that are either vacant or tenant-occupied are not required to be included the calculation.
5. New construction pre-sale requirement is temporarily reduced to 30%.
Read these letters in full.
President Obama signed the congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including San Jose. The counties of Santa Clara, Alameda, San Mateo, San Francisco & Contra Costa in the Bay Area will have the maximum loan amount at $729,750. Yesterday’s actions extends the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.
The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000.
“Home sales have shown significant movement upwards in the past six months and reduced inventory in some segments of the housing market, but not in all. Home purchases in the middle-income and higher brackets have not moved much, and those markets must improve before we can experience a fully sustained housing recovery. These higher loan limits will help motivate qualified home buyers to purchase in those markets,” NAR president Charles McMillan said.
These loan limits determine the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee” and also the Loan Amount that FHA can insure.
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The week that was:
A good week for the interest rate markets. Mortgage interest rates declined about 10 basis points. Treasury once again successfully sold $123B of notes in four auctions. Consumer confidence measured by The Conference Board declined more than expected, implying consumers may not be as convinced of a recovery as the equity markets.
Personal spending in Sept declined, new home sales were expected to be up slightly in Sept but declined 3.6%. Finally the stock market ended the week on what looks like the beginning of the long over-due correction that even the most bullish have been expecting for the past month. The DJIA declined 259 points last week, the rate markets benefited.
The week that will be:
2 Big news awaited: The industry is hopeful that the High Balance Conforming Limit and FHA Jumbo limit of maximum loan amount $729,750 will officially be extended this week through 2010. Also, there is a lot of buzz about First Time Home Buyer Credit being extended till April 30. Stay tuned!
There is an increasing buzz among traders that the Fed will alter the policy statement a little to take away market perception that the Fed will keep interest rates (FF rate) low for a “considerable” period; removing “considerable” with verbiage that allows the Fed more flexibility in the future. On Friday we will get the October employment report; estimates are for job losses to be a lot less than in the past year. Everyday this week markets will contend with economic reports of substance; ISM manufacturing on Monday, Oct auto and truck sales on Tuesday, ISM services on Wednesday (and the FOMC statement), Thursday weekly jobless claims. We expect market volatility to remain high.
On 10/21 FHA via it’s mortgagee letter announced delay in FHA condominium changes. This is what the letter mentioned:
Implementation of FHA’s new policy guidance for condominium project approval and condo unit financing will be delayed until December 7th 2009. The new guidance, to be issued within the next two weeks, will: 1) offer additional leniencies to address the difficult market conditions and 2) augment some portions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.
Until the new guidance takes effect on December 7th, 2009 lenders may continue to use the Spot Loan Approval guidance. Further, the site condo and manufactured housing condo project changes that have already been implemented are not affected by this delay.
Related post: FHA guideline changes to Condominium financing
If you are planning to buy a Condo in San Jose or other parts of the Bay Area and planning to get an FHA loan keep reading. FHA has made some major changes to their condo guidelines and they go into effect as of Nov 2nd, 2009. Some of the highlights:
- Currently lots of condominium projects in the bay area is approved by FHA. However, any project approved prior to October 1, 2008 loses it’s pre-approval and must re-apply. To find a list of approved projects, visit the HUD link https://entp.hud.gov/idapp/html/condlook.cfm. Make sure under approval method pick the option - “HRAP/DELRAP”. Thats the new HUD review and approval process.
- Spot approvals, where a project could be approved for an FHA loan even if the entire project was not approved by FHA, is not allowed anymore. And though some lenders will have the authority to do so, because of the enormous liability attached most likely they would refrain from doing it. Which means all project approvals will have to go to FHA directly.
That being the case, lets find out what are the FHA requirements for approving a condo project:
- No more than 30% of the units can have FHA financing
- >50% of the units must be owner-occupied.
- No single entity may own more than 10% of the units in a project
- No more than 15% of owners can be delinquent on their HOA dues. Also, no pending litigation against the HOA, it’s officers or directors is allowed.
- The HOA must also provide evidence of the project’s appropriate hazard, liability and flood insurance.
- For new constructions, at least 50% of the units in the project must have been sold.
- But in my opinion the deal breaker could be this condition - A current reserve study must be performed to assure the HOA has adequate funds available for the funding of capital expenditure and maintenance. With so many HOAs running into capital reserve issues recently, this condition alone could be the #1 reason why a lot of projects may not get approved.
Read more..
In it’s announcement on Friday, FHA tightened the credit standards for it’s Streamline Refinancing Program. So if you currently have an FHA loan on a San Jose home and want to refinance into another FHA loan, you will be subjected to new parameters starting January 1, 2010. Below are the highlights per FHA mortgagee letter issued on 9/18/2009.
A. Seasoning
At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.
B. Payment History
1) For mortgages with less than a 12 months payment history, the borrower must have made all mortgage payments within the month due.
2) For mortgages with a 12 months payment history or greater, the borrower must have:
a) Experienced no more than one 30 day late payment in the preceding 12 months,
AND
b) Made all mortgage payments within the month due for the three months prior to the date of loan application.
Read more..
FHA is implementing HVCC for San Jose & rest of the Bay Area loans. Yes, it’s finally happening. When I received the mortgagee letter yesterday from HUD, I must say I was stunned. Only few weeks back FHA commissioner had mentioned that he had no intention of implementing HVCC for FHA insured mortgages. But of all the changes that were announced to tighten the credit standards I personally think that this change is most critical and far-reaching.
Here are the highlights:
- Mortgage brokers and commission based lender staff are prohibited from ordering appraisals. FHA does not require the use of Appraisal Management Companies or other third party providers, but does require that lenders take responsibility to assure appraiser independence. Irrespective of whether they call it HVCC or not in letter, in spirit it’s exactly that.
- FHA appraisers are to be compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. AMC’s can add management fees to appraiser’s compensation. If I understand this correctly, this is good news for Appraisers since they will be not be compensated less. However, the borrowers will end up paying higher since they will also have to cover for AMC’s management fees on top of appraiser’s fees. Read more..
Federal Housing Administration (FHA), which insures lenders against losses on home mortgages, announced a series of changes that will have far-reaching impact on the housing market of San Jose, the entire San Francisco Bay Area and rest of the country.
Background -
The agency confirmed that, as of Sept. 30, it would fall short of a legal requirement that it maintain supplementary reserves of 2% of the loans it insures. Those reserves supplement a fund that provides for projected claims over the next 30 years. The extra capital cushion last year was about 3%, down from 6.4% in 2007. Falling reserves are because of higher claims that the FHA has been subjected to in last couple of years. The higher claims has come because of more defaults/delinquency on FHA Insured mortgages. The FHA earlier reported that in July 7.8% of the single-family mortgages it insured were 90 days or more overdue or in the foreclosure process, up from 6.6% a year earlier. For the second quarter, about 8% of all home mortgages were 90 days or more past due or in foreclosure, according to a survey by the Mortgage Bankers Association.
To ensure that FHA rebuilds the cushion of 2% or higher, Commissioner David H. Stevens on Friday announced plans to implement a set of credit policy changes that will enhance the agency’s risk management functions. Stevens also announced his intention to hire a Chief Risk Officer for the first time in the FHA’s 75-year history.
Commissioner Stevens said “To be clear, the fund’s reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action. That said, given the size and scope of the FHA and its importance to today’s market, these risk management and credit policy changes are important steps in strengthening the FHA fund, by ensuring that lenders have proper and sufficient protections.”
Good News for First Time Buyers - Mr. Stevens said tighter credit standards would suffice to rebuild the cushion to 2% or more, and that the FHA wouldn’t need to raise the premiums borrowers pay or seek an increase in its minimum down-payment requirement of 3.5%.
Read more..
The week that was
This week markets were bolstered by generally better economic data; the manufacturing sector based on the August ISM report on Tuesday showed much more strength that was expected, July factory orders were up, and the minutes of the 8/12 FOMC meeting continued to see a small light at the end of what would be defined as a very long tunnel.
Seven of the top eight most affordable months occurred during this year, according to the National Association of Realtors’® (NAR) Housing Affordability Index, which dates back to 1971. As a result, pending sales of existing homes rose for the sixth straight month in July, a trend not seen since the NAR began reporting data in 2001. Moreover, July’s sales were the strongest since June 2007.
However, in August unemployment rate jumped 0.3% to 9.7%. Also, for the month of August the government insured share of purchase mortgage application was 40.4% - up from 38.3% in Jul & 31.7% in Aug 08. Share was the highest since Feb 91, further documenting growing clout of FHA loans.
Mortgage rates for the week ended marginally better than last week.
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Beginning on Thursday, July 30, 2009, the Truth in Lending Act requirements regarding initial and final disclosures to borrowers, the timing of when fees can be charged and when closings may occur will become effective. These new regulations lengthen the time needed to close loans in order to ensure that borrowers have enough time to consider their options and feel comfortable moving forward with a loan. The factors that may impact the closing date of a loan include:
- Closing may not occur until 7 business days after initial disclosures are sent to the borrower.
- Upfront fees may not be collected from the borrower until initial disclosures are delivered by the borrower. Therefore, appraisals may not be ordered until initial disclosures sent by the lender are delivered to the borrower.
- An increase in Annual Percentage Rate (APR) by more than 0.125% requires the Truth in Lending Disclosure to be revised and delivered to the borrower 3 business days before closing.
Business days include Monday through Saturday and exclude Sundays and holidays.
Disclosures are considered “delivered” 3 business days after mailing.
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