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]

What’s behind the unusually high rate of contract cancellations and settlement delays in the real estate market? With signs of recovery emerging in many parts of the country, shouldn’t deals be zipping along with minimal complications?

Apparently not. Nearly one-third of real estate agents in a new national survey reported experiencing contract cancellations — purchases crumbling before going to closing — in February. [more]

How big a whack did your credit scores take during the grim years of economic
distress following the housing bust? Was it 20 points, 50 points, 100 points
– or maybe no drop at all?

These are key questions affecting millions of potential homebuyers who
hope to qualify for mortgages and current owners looking to refinance. New
research from a major credit-risk evaluation company suggests that the drop
in huge numbers of Americans’ scores was dramatic.

FICO (formerly known as Fair Isaac Corp.), which developed and markets the
eponymous score that dominates the home mortgage field, found that during
2008 to 2009, approximately 50 million consumers in this country saw their
FICO scores plunge by more than 20 points. Nearly 21 million of these lost
more than 50 points. Many lost 100 points or more because of the most severe
delinquencies. [more]

After a year characterized by grumpy partisan gridlock, Congress came up with a Thanksgiving
compromise that could change the mortgage choices of buyers and refinancers in more than
660 markets across the country: It raised maximum loan limits for the Federal Housing
Administration while leaving loan ceilings untouched for Fannie Mae and Freddie Mac.

In effect, this may make FHA the go-to financing option for borrowers needing loans up to
$729,750 — with down payments as low as 3.5 percent — in New York, New Jersey, high-cost areas of California, metropolitan Washington D.C., and scattered counties in other states
including Massachusetts, Florida and North Carolina. Fannie Mae- and Freddie Mac-eligible
loans in those areas, meanwhile, stay capped at $625,500.

Equally important, the new plan raises the FHA ceilings for purchasers in hundreds of more
moderate-priced markets. [more]

Is a little-publicized switch in federal mortgage policy causing huge problems for condominium
sellers, buyers and homeowner association boards across the country — even depressing prices
and blocking refinancings?

Condo industry leaders, from the 30,000-member Community Associations Institute to
individual unit owners and real estate agents, are emphatic that the answer is yes. They say a
series of rule revisions by the Federal Housing Administration has caused thousands of condo
projects to become ineligible for FHA mortgages. This, in turn, has abruptly shut off loan money
for would-be condo buyers and refinancers, forcing them to pursue conventional bank loans
requiring much higher down payments — sometimes 20 percent and higher versus the FHA’s 3.5
percent minimum — that they often cannot afford. [more]

In its bid to reduce taxpayers’ $141 billion exposure to housing mortgage risk and spur private investment in the sector, Fannie Mae, Freddie Mac and the Federal Housing Administration stopped backing jumbo housing loans. According to the Wall Street Journal, that move could put the housing market, and specifically housing prices, in a further funk.

The three entities backed about 90 percent of home mortgages in recent months, thanks to the expanded loan limits. But the limits were restricted this month, meaning more buyers will have to turn to private banks to secure mortgages. [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.  [more]

The Federal Housing Administration’s Mortgagee Review Board announced today that it will punish 240 FHA-approved lenders who failed to meet its requirements, including 15 from South Florida.

South Florida lenders who will be reprimanded include Miami’s Certified Home Loans of Florida and USA Mortgage Bankers Corporation, and Orbit Mortgage Company in Coral Springs. Sanctions include probations, suspensions and civil money penalties, the FHA announced today. For particularly serious violations, the board can even withdraw a lender’s FHA approval, barring him or her from participating in FHA programs.

“It’s never been more important that lenders doing business with FHA apply our standards to each and every loan they originate and underwrite,” said Acting FHA Commissioner Carol Galante. – Russell Steinberg [more]

How big a deal is the upcoming cutback in mortgage limits for Fannie Mae, Freddie Mac and the Federal
Housing Administration? Will buyers and sellers who depend on jumbo-sized loans find themselves in a
financing squeeze after Oct. 1, when the limits plunge in key markets around the country?
Housing and realty lobbies are pushing hard on Capitol Hill for a continuation of the $729,750 high-cost
area maximum, but one industry is delighted by the prospect and is gearing up to fill the gap.
From small community banks to megabanks, the message is the same: Bring on the switch to lower
limits. [more]