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FHA Lending Changes that Could Impact Real Estate Consumers

Did you know that in 2009, the Federal Housing Administration (FHA) insured nearly 30% of the single-family mortgage market and that more than 50% of all first-time home buyers used FHA programs?

San Diego has seen the number of FHA loans rise significantly in the past several years. In North San Diego County Coastal neighborhoods we rarely saw an FHA offer come through on our listings but today with the FHA limit in San Diego sitting at $697,500 FHA loans are often submitted.
In today's challenging credit climate, many home buyers and homeowners are turning to FHA for insurance, to purchase loans, and for refinancing options to get out of risky ARMs or subprime loans. As a Member of the Top 5 in Real Estate Network®, I have access to information from the National Association of Realtors® (NAR) regarding recent and upcoming changes to FHA's single-family program that could impact the use of these important programs for consumers in the future. According to Jerome Nagy, senior regulatory policy representative at NAR, in order to replenish its dwindling reserves, FHA has implemented or proposed the following changes:

1.  Mortgage Insurance Premium (MIP)
FHA has increased the upfront MIP from 1.75% to 2.25% for borrowers while it awaits legislative authority to increase the annual premium. FHA stated it will decrease the upfront premium when they can increase the annual premium.

2.  Credit Score Changes
FHA has proposed that borrowers with a credit score below 580 be required to make at least a 10% down payment. The minimum down payment will remain at 3.5% for all other borrowers.

3.  Seller Concessions
FHA intends to propose a rule to decrease allowable seller concessions from 6% to 3%. NAR plans to argue against this decrease since closing costs differ greatly among states, and with fees on services (such as appraisals) increasing, seller concessions can be a vital part of closing the transaction.

4.  FHA Loan Limits
Current FHA loan limits are as high as $729,750 in high-cost areas, and are set to expire at the end of the year and revert to lower amounts, potentially putting a damper on a housing market rebound. A decrease of current limits would adversely affect 612 counties in 40 states and the District of Columbia, reports NAR, which is urging passage of legislation to make the loan limits permanent.

5.  Condominium Rules
FHA is delaying implementation of "Mortgagee Letter 2009-19" and making temporary enhancements to the policy instead, such as eliminating the owner-occupancy requirement for FHA condo mortgages and reducing the number of units sold prior to FHA's endorsement of a unit from 50% to 30%.

Pending home sales nationally were up 8.2% for February 2010, in the West, according to the report pending sales were off nearly 5%. In the San Diego real estate market the picture was significantly brighter than the February numbers that came out today would suggest. Your March 2010 North San Diego Coastal Real Estate Update is available below. The pending home sales in North San Diego Coastal markets covered by the report showed a 51% year over year rise. Other important insights show the Months Supply of Home Inventory down year over year by 48% and the Average Market Time lower as well. The North San Diego coastal real estate market appears to be turning a corner, there is a note of caution in the air. There is a good deal of stimulus in the system right now, some of which is coming to an end. The Fedreal Reserve has finished purchasing Mortgage Backed Securities and federal tax credits for move up buyers and first time home buyers are scheduled to end soon.The real question is what will happen over the next 3- 9 months. Tell us what you think? Give us your thoughts below. 

Areas of focus in the report are the following zip codes: 92007,92008,92009,92010,92011,92014,92024,92067,92075,92130.

If you would like a local report for your zip code specifically or your neighborhood contact me at (760) 602-1000 or email Loren@coastalhomefinder.com and ask for your report.

Click on report below to see the March 2010 North San Diego Coastal Real Estate Report.