FHA Loans by lonyoo

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									MORTGAGE LENDING
Avoid the Pitfalls And Seize the Opportunities

The FHA Opportunity
• About South Shore Savings Bank
– state chartered (MA) $950 million mutual – market area is Eastern MA – annual originations - $75-$100 million – ARM loans originate for portfolio; fixed rate loans sold in secondary market – 100% conventional loans for many years – except HECM – Plan to increase loan production thru newly formed mortgage subsidiary

FHA – Why Now
FHA loan limit change earlier in 2008
– For the first time in years better fits with home prices – Boston MSA now $523,750 for single family – Maximum loan amounts vary by state – for limits for your geographic region – go to www.hud.gov.

FHA – Why Now?
• FHA – the primary first time home buyer program?
– Private mortgage insurers tightened underwriting guidelines – Higher conventional loan down payment requirements – FHA may be the only viable alternative for many borrowers, particularly first time home buyers – Market share – we are not willing to concede this business to the mortgage bankers and brokers

FHA Key Loan Features
• Low down payment – 3.5% for purchase transactions • Cash out refinances • “No” minimum credit score • Non-traditional credit • Non-occupant co-borrowers • No pre-payment penalties

FHA Reform
• FHA has made many positive changes
– Simplified down payment requirements – Simplified appraisal – Many repair requirements eliminated – Simplified closing costs and allows customary reasonable fees and costs – Higher overall loan limits and higher limits for high cost loan housing markets

Challenges
• Market acceptance – borrowers and Realtors perceptions of FHA
– With the FHA reforms and tightening conventional market, may be only option

• Staff training – despite reforms, still a complex origination/underwriting process • Obtaining FHA lender approval - backlog

FHA Lender Approval
• Supervised Mortgagee or Supervised Loan Correspondent • Supervised Mortgagee
– Can originate, underwrite, purchase, hold, service, sell, and submit applications for mortgage insurance

• Loan Correspondent
– Can originate and submit applications for insurance – Must be sponsored by a DE Mortgagee – sponsor performs all underwriting

FHA Lender Approval
• Mortgagee vs. Correspondent Considerations
– Experience of staff – Operating costs – Control of the process – Volume – Profitability – Other


								
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