A Sacramento mortgage lender's vision

Hello again. Today, we're going to talk a little bit about FHA loans, and HUD. FHA stands for Federal Housing Administration, a government-sponsored lender which was created during the Great Depression. HUD just means the Office of Housing and Urban Development and is the regulatory body for FHA.

FHA was created to help people with little or no downpayments into houses. For that it works great. It was a big factor in recovering from the Great Depression. But like a lot of the "temporary" reforms that were in place during that time, FHA stuck around.  Some other familiar names like FDIC and SEC (Securities & Exchange Commission) also come from that period.

To clarify, one could say that FHA is a type of loan. How is this loan different from other types such as Conventional or even the dreaded Subprime? Well, the US Government guarantees each and every FHA loan against default, through mortgage insurance.  On Conventional loans, guarantee against default is provided by any number of 3rd party mortgage insurers. On Subprime, the higher rate (and yield) of the loan was supposed to compensate for the lack of mortgage insurance.  In addition, FHA loans are underwritten to different standards then any other type of mortgage.  They also have different rules as far as how much cash investment is required.

Which brings me to my next point- FHA only requires that 3% of the purchase price be made as down payment.  Of course in 2004-2006, this was laughable as lenders were falling over each other to offer 100% financing structured any way you wanted it. Conventional mortgages had these programs as well, though not as aggressive on credit requirements.  Following the beginning of the mortgage crisis, most Subprime lenders began requiring down payments of 20% or more, while most of California, Nevada, Florida and Arizona were labeled "declining markets" and thus required down payments of 5-10%. Now, this began to make FHA look pretty attractive. To sweeten the pot, a little known program called "Seller sponsored gifts" was basically allowing FHA loans to be 100% financing.  How? Well, a loophole in FHA rules permitted the downpayment to come from a third party, if it was a gift.  So a host of companies (you may have heard Ameridream or Nehemiah) created an industry which collected money from the home seller, and regifted it to the buyer.  This went on for about 10 years under various stages of heat, and was finally axed in the recently passed second Economic stimulus bill, banning programs of this type following October 31st.  It is a shame to us that this happened, as it will result in less people being able to buy. There is of course an appeals bill making its way through the White House, check back for updates.

To summarize, FHA is currently the most aggressive loan out there, you only need to come up with 3% of the purchase price, which your family can gift you, or you could even find a true down payment assistance program such as the one available through the city of Citrus Heights. We will cover alternate down payment assistance in another segment.

The first economic stimulus package of course expanded FHA lending dramatically and raised the loan limits to $580,000 in Sacramento, Yolo and Placer counties. They have since been made permanent. In my next post, I will cover what the new FHA rules offers people behind on their payments.

It seems that CalHFA has decided to severely limit the amount of houses available under the CHLSP. Only about 20 are eligible for the program, which is unfortunate as I had high hopes for it.  We are however still offering quite a few different ways to get to that magical 100% financing-see here.

On another note I have seen rates drop over the last 2 weeks which is benefitting anyone able to lock right now. If current economic conditions hold up, we should see these favorable conditions continue. Of course in this market strange things can surface at any moment, bumping rates up or down.

Finally, I have recently noted a large increase in illegal activities with non-FHA approved mortgage brokers. It works like this- you are a loan officer at broker B, who is not FHA approved. You make a deal with broker A, who is FHA approved, you refer the deal and get paid. What's the problem? Well both broker A and Broker B will not want to take a paycut, so generally the client gets charged double. There is another mouth in the deal, and this is why HUD has explicitly said that no more than a "reasonable advisor fee" may be charged. The other side effect is there is an extra layer of potential mistakes and miscommunication- you might as well be playing the childhood game telephone.  IF YOU ARE A LENDER DOING BUSINESS LIKE THIS YOU ARE BREAKING THE LAW. What has been happening is that these lenders are also illegally advertising and soliciting FHA loans.  If you are not sure, take a look at the FHA license search engine. Never hurts to be careful.

For the most part, I have finished adding content to our website. I have a few more things to do but they are all "behind the scenes". Returning users should find content laid out in a much simpler, more accessable way. Ideas now flow logically around the site, in other words if one of our customers are reading our page about the FHA Secure loan and suddenly wonder what their ARM will adjust to, there is a link right there. I've also developed a "landing page for clients who are already doing business with us so they can easily find what they need.

Navigation has been streamlined as well and everything else is in great shape.

Community Stabilization Home Loan Program

Want to buy a forclosed home, and can't afford it? CalFHA has recently expanded this amazing program to Sacramento. If you qaulify, you will recieve special low rate financing approved by the Governor. As with all programs of this type the money will be f-l-y-i-n-g out the window so go check it out.

With the recent passage of the Housing and Economic Recovery Act of 2008, all seller-sponsored down payment assistance programs such as Ameridream, Genesis Foundation, HART, Nehemiah etc were cut off. The bill provided that these programs continue through September 31st, 2008. While this is the letter of the law, we have seen many lenders and investors rapidly kill loans with this type of financing. Some have been closing their doors to new applications of this type without any warning or giving time limits to the loans already in their pipeline.

Why is this happening? Well, the secondary market [the marketplace where existing loans are bought and sold] is extremely jumpy and volatile at the moment. When a trend begins (the fear that investors may get stuck with these loans) the market tends to follow. So far we have seen of the big players Wells Fargo and Chase Home Mortgage and a lot of smaller players cut themselves off themselves from loans of these type. We do have a few investors remaining who have pledged to take this product through the end of September but some have been adding cost to compensate for extra risk.

BOTTOM LINE IF YOU ARE USING ONE OF THESE PROGRAMS WITH FHA AND YOUR LOAN HAS NOT BEEN SUBMITTED TO UNDERWRITING YOU NEED TO TALK TO YOUR LOAN OFFICER NOW.

For alternate methods of Down Payment Assistance and 100% financing loans please visit our related page.

Hello, I'm Aaron Opfell, webmaster for Sunrise Vista Mortgage and DRE licensed loan officer of the same.

This will be our first blog post in history. Sunrise Vista has been around since 1989 but is slowly easing into being technological savvy!  It is my intent to have this up and running with at least 3-4 posts per week.  If you are a current client of ours you are more than welcome to subscribe and add to your information.  If you are a new visitor (and really what this blog is about), you can expect find up to the minute information on the bond and securities markets, rate and government trends, up to the minute info on local Sacramento and Citrus Heights home prices as well as basically everything you needed to know about mortgages, not already on our site.

Sunrise Vista specializes in FHA loans at the moment. FHA is the buzz word in our industry now as a lot of loose lenders are no longer with us. My next entry will go into detail on Sunrise Vista's 17 year relationship with the Office of Housing and Urban Development and writing FHA loans. It will bring things through to the present time we are in now.

So if you are new here, take a look around. We have a lot of detailed content on FHA and VA loans, as well as fresh mortgage related articles written by local authors, and almost a dictionary containing explanation of mortgage terms.