From the March issue: For homebuyers hoping to use minimal cash by getting an FHA-insured mortgage, here’s some sobering news: Thanks to an ongoing series of fee increases and underwriting tweaks — the most recent of which were announced Jan. 31 — FHA is getting steadily more expensive. FHA is the Federal Housing Administration, the largest source of low down-payment mortgage money in the country. Its minimum down is just 3.5 percent, compared with anywhere from 5 to 20 [more]

A federally backed lending program may help buyers tap into run-down homes for a quick return on investment, the New York Times reported. The Federal Housing Administration’s 203(k) program allows buyers to incorporate the cost of necessary repairs into their mortgage, on both single-family homes and multifamily homes with up to four units. The loan—which requires a low down-payment of 3.5 percent — covers purchase and repair costs and is determined using the property’s post-restoration value. Originations of 203(k) loans have increased to more than 25,000 in 2012, up from 3,400 in 2007. This opens the door for investors to quickly turn around a home for a profit, experts say. [more]

Carol Galante

Despite the Federal Housing Administration’s growing losses stemming from troubled loans and talk of a taxpayer bailout, the U.S. Senate confirmed Sunday that Carol Galante would continue to be in charge of the agency. Galante, who had been running the FHA in an acting capacity since July 2011, was confirmed as an assistant secretary of the Department of Housing and Urban Development, in a 69-24 Senate vote. The FHA backs a total of $1.1 trillion in U.S. home mortgages. Last month, due to troubled loans issued during the housing market downturn, it reported a projected deficit of $16.3 billion. [more]

Federal legislation giving the Federal Housing Administration increased power to recoup losses on bad loans is not likely to pass in the Senate by the end of the year because of Republican opposition, according to the Wall Street Journal. The bill would give the FHA the power to force lenders to cover the cost of a defaulting loan, if the agency discovers a serious violation of federal lending standards, raising much needed cash. The bill “is a necessary and responsible step to protect taxpayers given the short amount of time left in the legislative session,” Sen. Tim Johnson, the Senate Banking Committee’s chairman, wrote in a letter last week. [more]

Rehabbers and real estate investors rejoice: You’ll still be able to sell houses to first-time buyers using low-down payment FHA-insured mortgages next year, even if you’ve owned the fixed-up property for less than 90 days. The Federal Housing Administration has decided to extend its rule permitting loans on quick “flips” of renovated houses beyond the scheduled Dec. 31 expiration deadline. [more]

Barry Rutenberg of the NAHB and Carol Galante of the Federal Housing Administration

The National Association of Home Builders has called for “policymakers to proceed cautiously” when considering a restructuring of the Federal Housing Administration, which for decades has played a key role in stabilizing the housing market. The FHA ended September with a $16.3 billion in losses.

With rising mortgage delinquencies could exhaust the agency’s reserves, the FHA is expected to announce that it will rely on funding from taxpayers for the first time ever. The decision on taking a taxpayer bailout won’t come until 2013. [more]

Here’s some encouraging news for condominium unit owners, sellers and buyers: The biggest source of funding for low down payment condo mortgages, the Federal Housing Administration, has revamped controversial rules that caused thousands of buildings across the country to lose their eligibility for FHA financing. The revised guidelines, which were issued Sept. 13 and took effect immediately, should make it easier for large numbers of condo associations to seek certification by FHA. [more]

In a policy switch that could be important to thousands of applicants seeking low-down-payment home mortgages, the Federal Housing Administration has rescinded tough new credit restrictions that had been scheduled to take effect July 1.

The policy change would have affected borrowers who have one or more collections or disputed-bill accounts on their national credit bureau files, where the aggregate amounts were $1,000 or greater. Some mortgage industry experts estimate that if the now-rescinded rules had gone into effect, as many as one in three FHA loan applicants would have had difficulty being approved. [more]

The Federal Housing Administration and President Barack Obama’s plan to jump-start the housing market has led to historically low interest rates of 3.75 percent on 30-year mortgages, but critics of the policy warn that the FHA’s easy lending may lead to a second housing bubble, the Fiscal Times reported. [more]

A little-noticed mortgage rule change that took effect April 1 could create hassles for significant numbers of homebuyers who plan to use low down-payment Federal Housing Administration financing this spring.

The change affects anyone with one or more “collection” accounts buried away in national credit bureau files. These include medical, student loan, retail and other debts reported as unpaid — correctly or incorrectly — by creditors and subsequently sent to collection agencies. [more]