FHA: Changes for the Better?

There have been many new regulations enacted by our government, new guidelines adopted by HUD-approved mortgage lenders as a consequence and a number of rule changes for the rest of us to abide by. All of these changes are being implemented this year although the law was enacted by Congress and signed into law by then President, George Bush in July 2008 (almost two years ago).

The FHA guidelines under which mortgage lenders and brokers are operating today were modified to crack down on the “wrong-doers” who, in the past have violated one or more of the old guidelines; and although this is a step in the right direction by the FHA, some of the changes seem as if they would have a reverse affect on the mortgage market. For example, some of the assistant features which existed for down payment and closing costs have been modified under the new FHA guidelines. An example of this is reduction in the “seller concession” from 6% to 3% and the lifespan of an appraisal is now 4 months, reduced from 6 months.

Strangely enough, the program that does more to protect a new homeowner more than any other have received less attention in the way of support and funding by lenders and investors. Almost every aspect of the 203k rehabilitation mortgage can be thought of as protecting the home buyer; from the licensed, insured, and work history documentation requirement of the general contractor, to the hud consultant supervision of the work and waiver of monthly payments for an uninhabitable house, plus so many other built-in protections for the home buyer who would have less maintenance and repair cost to worry about after making the purchase, thereby reserving more money to be applied to home loan payments.

The general consensus of industry professionals is that the 203k program involves too much work so nobody wants to deal with it. When I have had the opportunity to direct my questions to an authority on the subject I asked if FHA would consider bringing back the “Escrow commitment procedure” as one way of increasing homeownership by reintroducing “qualified and responsible” non-profit organizations as community-based entities that are capable of sound counseling of would-be home buyers in many low-to-moderate income communities throughout the country.

The reliance on qualified non-profit agencies to perform ongoing counseling to homeowners in jeopardy of losing their homes has been in place for over two decades, and it seems to me that the reliance on these organizations ought to be prior to homeownership, not after the home is purchased and the problems are real. The point is that if these agencies are expected to solve problems after the problems have occured, then why not utilize their services to help in reintroducing the procedure I spoke of earlier?

Realizing that several elements of the economy must be working relatively well in order for the mortgage industry to return to acceptable form, I would really like to see more of an effort made to promote and fund the 203k program so that the protections afforded new buyers and the money-saving procedures featured in the program can be available to offset some of the increased costs associated with the program under these new set of rules and guidelines.