Over the last couple of years lending guidelines have gotten dramatically tighter. Interference from the politicians at both the national level (Bernanke, Obama, et all) and the state & local level (Cuomo, Schwarzenegger) have caused a dramatic inability of the home finance market to function normally. The most interesting part is that the federal government, namely the Fed, has worked tirelessly over the course of the last year to drive and hold interest rates lower for borrowers. But oddly, Fannie Mae, owned by the government, remember, has raised the fees on all the loans it works with.
This has stolen away the potential savings of all but those of the most perfect borrowers. Combine this with tighter guidelines and an impossible to navigate foreclosure and modification system and you have the horrible mess we are in. Additionally, conventional financing has been beset by other challenges. Much has been written about the Home Valuation Code of Conduct (HVCC) and the problems it has caused since
its implementation. On top of that, mortgage insurance has become extraordinarily difficult to get for all but the most perfect of borrowers who would put only 10% down on a home purchase. At 5% down, the mortgage insurance is available, they say. However, it is so expensive that you may as well put the 10% down anyway.
Finally the Mortgage Disclosure Improvement Act (MDIA) is causing more lenders, in the name of clarity to repeat and resend the numbers to clients 3-4 times throughout the mortgage process, adding at least a week and more likely two to the time is takes each conventional loan to get to closing.
Into this mess, enter FHA.
The market share for FHA has gone up dramatically this year. You may ask why? Here is the answer. First, brokers and lenders still have the ability to talk about values with appraisers, which ensures that people are not wasting money pursuing a transaction that could be derailed by inexperienced appraisers not familiar with the area. Second, there is no additional charge for PMI when you put as little as 3% down. This has great appeal to first time buyers.
Finally the mission of FHA is housing (not profits) so loans that make sense get done. The loans that don’t fit in the Fannie Mae box get done FHA. They may not think outside of the box, but their box is bigger.
These reasons have it making more likely than ever that your next mortgage will be cheaper, easier to understand, and get done more quickly through an FHA lender.
