Could gloomy popular assumptions about how tough it is to get approved for a
mortgage be scaring away large numbers of people who are qualified from even
applying?

Could the same worries — I can’t come up with the big down payment I
need, my credit scores are too low, my bank account has almost none of
the “reserves” lenders want to see — put a needless damper on a housing
recovery in the new year?

You bet. Lenders and economists will tell you flat out: The lack of accurate
information about the availability of loan programs that are designed to
address special needs is discouraging far too many consumers from even
considering an application, much less shopping around. [more]

Amid concerns about the Federal Housing Administration’s financial health, Obama’s has just approved an appointee to head the agency, the Wall Street Journal reported. But his pick, Carol Galante, has not gone over well with Republicans, the Journal noted.

“I think we need people now in the administration with a sense of urgency about the need to turn things around, reduce our debt, and to avoid further bailouts,” said Republican Senator Jim DeMint of S.C. “She does not appear to have that sense of urgency.” The Wall Street Journal reported last week that lawmakers are concerned the agency will need a bailout, a belief confirmed by both an independent audit and a University of Pennsylvania study. [more]

As if there were not enough bad news for condominium owners already, there is the fact that tomorrow marks a mass expiration of Federal Housing Authority and Fannie Mae project certifications for condo projects across the U.S.

To combat the possible exodus of eligible condo buildings, National Condo Advisors, a Westchester-based firm that streamlines the FHA-approval process for developers and owners, is holding a 24-hour application marathon to push through the torrent of re-certifications.

Without certification from the FHA or Fannie Mae, many condo buildings may find it much more difficult to sell their units, but many aren’t even aware that the certification is expiring, said Orest Tomaselli, CEO at National Condo. [more]

HUD Secretary Shaun DonovanControversy continues to swirl around the Federal Housing Administration, as lawmakers are accusing the agency of exacerbating its problems by downplaying the extent of its financial struggles.

The Wall Street Journal reported that lawmakers are concerned the agency will need a bailout, a belief that both University of Pennsylvania research and an independent audit confirmed in recent weeks, and want Department of Housing and Urban Development Secretary Shaun Donovan to come clean.

The independent audit found that projected losses on the $1.1 trillion in mortgages the FHA backs would leave just $2.6 billion in reserves, or 0.24 percent of the value of the agency’s insured mortgages, to cover losses over the next three decades. [more]

Federal Housing Administration officials denied reports showing the agency would face mounting losses and eventually require a taxpayer bailout, the Wall Street Journal reported, and said it continues to generate more revenue than expenses.

The FHA said it would have $2.6 billion in reserves even after taking into account expected losses on the $1.1 trillion of mortgages it guarantees, assuming housing prices fall 5.6 percent next year and then begin to rise. Once those prices rise, the FHA believes it will be able to replenish its reserve funds very quickly. Comments

Congress overcame Republican opposition to restore higher Federal Housing Administration mortgage loan limits last night, according to the Wall Street Journal, after the limit was lowered to pre-recession levels Oct. 1. The Senate and House each voted to pass the bill Thursday, even though Republicans have insisted that the government reduce its role in the housing market. Ceding to those wishes, the higher limits only apply to FHA-backed loans, and not those originated by federally owned Freddie Mac and Fannie Mae.

The FHA will once again allow buyers in expensive markets to take out loans of up to $729,750, while only requiring a down payment of 3.5 percent. [more]

As the Federal Housing Administration prepares to release its annual financial report next week, there’s growing concern that the agency could run out of money and seek a taxpayer bailout for the first time ever.

The Wall Street Journal cited a report by University of Pennsylvania professor Joseph Gyourko that estimated the agency stands to lose $50 billion in the coming years because of the larger role it has taken in mortgage loan originations since the housing bust. Gyourko said the FHA is underestimating the potential impact of prolonged high unemployment and fallout from the homebuyer’s tax credit in its internal calculations. Comments

The U.S. Department of Housing and Urban Development is immediately suspending Michael Primeau, former president of the defunct Melville, L.I.-based Lend America, from doing any business with HUD, after he admitted engaging in a wide-scale mortgage fraud scheme, according to HUD.

He pleaded guilty to charges he directed employees of Lend America, a former Federal Housing Administration-approved lender, to divert mortgage funds intended to pay off borrowers’ first mortgages at refinance closings in order to pay company operating expenses, a press release from HUD said. Primeau could not immediately be reached for comment. – Miranda Neubauer [more]

Bank of America should face fraud claims because its Countrywide unit submitted faulty data in claims for reimbursement of federally insured mortgages, according to an audit by the Department of Housing and Urban Development, Bloomberg News reported.

“Countrywide did not properly verify, analyze, or support borrowers’ employment and income, source of funds to close, liabilities and credit information,” a HUD regional inspector general wrote in the audit. “This noncompliance occurred because Countrywide’s underwriters did not exercise due diligence in underwriting the loans.” HUD runs the Federal Housing Administration, which insures mortgages on loans to borrowers who can’t find traditional financing, such as those with low income.  Comments

Already on life support, the housing market endured another body blow this weekend when the cap on mortgages eligible for federal loans was reduced. Only loans of $625,500 or less, compared to the previous limit of $729,750 for the country’s most expensive markets, will be eligible for the lower down payments and interest rates promised by government loans. Those jumbo loans that exceed the limit will become more expensive.

Just 2 to 4 percent of the market will be impacted by the change, according to CNN, or about $30 billion of the $600 billion worth of loans Fannie Mae and Freddie Mac acquired in 2010. [more]