San Jose Conforming & FHA Loan Limits extended through 2010

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 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…
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San Jose Weekly Mortgage Market Commentary 11/01/2009

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…
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Delay in FHA Condominium changes for Bay Area

On 10/21 FHA via it's mortgagee letter announced delay in FHA condominium changes. This is what the letter mentioned: Implementation of FHA 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…
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FHA is changing guidelines for Condo in Bay Area

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 linkhttps://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.
[rate-quote-middle-cta] That being the case, lets find out what are the FHA requirements for approving a condo project:
  1. No more than 30% of the units can have FHA financing
  2. >50% of the units must be owner-occupied.
  3. No single entity may own more than 10% of the units in a project
  4. 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.
  5. The HOA must also provide evidence of the project's appropriate hazard, liability and flood insurance.
  6. For new constructions, at least 50% of the units in the project must have been sold.
  7. 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.
(more…)
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FHA announces changes to Streamline Refinancing for San Jose Homes

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…
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FHA implementing HVCC for San Jose loans as of January 1, 2010

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:
  1. 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.
  2. 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. (more…)
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First HVCC, then MDIA & now DRASTIC changes to FHA Guidelines

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."
[rate-quote-middle-cta] 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%. (more…)
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San Jose Weekly Mortgage Market Commentary 9/7/2009

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 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. (more…)
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New Truth in Lending Requirement will Clog the Pipeline

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…
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San Jose Weekly Mortgage Market Commentary 07/26/2009

The week that was Mortgage Loan Limits Extended: The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration. The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400B in single-family loans during fiscal year 2010, up from $315B in the current 2009 fiscal year, which ends Sept. 30. Mortgage Rates mostly unchanged:…
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