By Lynn Minnick
Although I’ve been in real estate for 10 years now, I just closed on my first HUD foreclosure. We haven’t had that many in my market (yet!) and so far I’ve somehow managed to avoid them. I almost fell out of my chair at the closing when the HUD attorney handed me a survey to complete regarding my experience selling the property! Really? I had a lot to say about not getting answers from the transaction management company when I asked, but mostly my beef was with the additional expenses incurred by the buyer.
1. When the information lists a repair escrow, it’s not the same as you’d think. In this case, it meant the buyer has to mortgage the amount listed ($2,000 in our example) which is held in escrow by their lender, and paid out to the contractor upon completion after the closing. This was unclear to me, the buyer, the lender and the attorney involved. There really should be some type of disclosure/explanation attached regarding this on the offer documents or somewhere in the paperwork.
2. In the case of a condo, as mine was, HUD does not provide resale packages. At $100 a pop, this was another surprise expense to the buyer, and there is no clause for condo document review. There was no ability to add such a clause either.
3. Not only are there no keys to the property, which of course I expected, but there was no remote garage door opener, and no mailbox key. (Looking back, I suppose none of that should have come as a surprise – we imagined we’d be able to get an extra mailbox key from the association – that wasn’t the case – the buyer has to install a new lock there as well. That’s more of an annoyance than an expense.) Continue reading »
By Nobu Hata
The skinny: The Department of Housing and Urban Development is seeking public commentary through Aug. 14 on three “measures” that “reduce financial risk and preserve affordable mortgage financing for responsible consumers.”
1. Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.
2. Reduce allowable seller concessions from 6 percent to 3 percent. Allowing sellers to contribute up to 6 percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to 3 percent will bring FHA into conformity with industry standards. Continue reading »
By Nobu Hata
With the down market and the inevitable mass exodus of “those” loan officers, you’d think we could rest easy knowing that the loan officers left would be – for lack of a better word – decent.
Holy Hannah, would we be wrong.
In the last couple weeks, I’ve had various buyers shop their loan around, including those using FHA. What I thought were set guidelines and fees isn’t what it seems. One particular buyer of mine asked for Good Faith Estimates based on the same home, price and mock closing date, from each of the loan officers he’d met with who’d pulled his credit, on my recommendation. Lo and behold, one origination fee was $1,100 more than the other. The rest of the meeting was an eye-opening study of mortgage v. mortgage.
Now, I’m not going to get into specifics of big bank versus broker, nor the merits and drawbacks of each. But what I will say is that there’s no better time to brush up on the new GFEs and fees associated with them. Fees and guidelines for all types of loan products are changing at a lightning pace, and while it’s largely up to our clients to perform their due diligence, it’s up to us to impart some insight. Continue reading »
By Laura Rubinchuk
When I heard about the new FHA DELRAP/HRAP guidelines for condo financing, my gut reaction was, “Well, I might as well go find another job.” Some of the subjective guidelines for the new approval process will greatly affect my market:
-Proximity to a noise (i.e. busy streets, highways)
-Proximity to a gas station
-Percentage of commercial space
And the list goes on, and on… For those of us in a Metropolitan/Urban environment, the whole point of condo living in the city is ease of travel and lifestyle. In the D.C. area, we have numerous major highways that lead into the District, the metro system, etc. and the majority of our high-rise condo buildings are located within blocks of these things.
So tell me how it makes sense to take buildings we’ve been selling for years with spot-approved FHA loans, taunt first-time buyers or other qualified buyers who have the minimum 3.5 percent down-payment, and tell them that because it’s the first of the month of this year, now they have to wait WEEKS to months for a green light on the home they fell in love with, if the seller is willing and/or able to wait at all!
Again, I ask, how does the economy continue to grow if the FHA puts the cabash on condo financing and eliminate the pool of buyers who don’t have the minimum 10 percent down-payment but qualify for the loan? Even funnier, why is the HUD website of approved condo projects only searchable from Monday-Friday, 8 a.m.-9 p.m.? Does the site need beauty sleep?
I don’t intend to start a political debate, but I can’t help wondering if the underlying reasons are a bigger concern? Is the FHA running out of money? Are they trying to keep out some buyers so some remain for later in the year?