The Charge Risk At Your Mortgage Guarantor Market

In recent days, stakeholders have come nearer to agreed on particular facets of housing finance legislation reform. However, many differences still exist. A number of home bill bills are pending in both houses of Congress and there is still deadlock about the tax provision for home mortgage relief. Although, it's anticipated that at some stage, the enacted housing bills will likely be voted out of committee and to the last house of Congress. There is a need therefore for the housing industry to become well prepared for the changes which are to come.

The House and Senate recently passed a Joint Resolution (JSR) proposing a number of changes from the FHA Home Loan Program which will ultimately affect the housing market. The House has passed the joint resolution with a vote of 401-5; the Senate hasn't passed the same resolution. The Joint Resolution is focused on altering the FHA's Home Affordable Program (HAP) by raising certain home features, reducing or eliminating unnecessary fees, and loan restructuring programs. The upgraded home characteristics will, if passed on, affect the home finance actions of FHA guaranteed borrowers.

The most publicized quality of the Joint Resolution is the provision that will enable FHA insured homeowners who use a manufactured home or a Yurt to be treated like other residential properties. Many housing experts believe this shift, if it is passed, will create the loss of many manufactured homes and manufactured home owners into the FHA. Although, this issue hasn't been addressed yet. For now, homeowners who use either a Yurt or a manufactured home which is subject to the MMCAD program may keep on using their houses as they are in these applications.

The second proposed change is to raise the maximum loan amount for first time home buyers and decrease the rate for adjustable rate mortgages or ARMs. Currently, there is absolutely no limit on the amount that can be borrowed and there's absolutely no limit on the rate of interest. Manufactured housing investors have a difficulty when prices rise because this directly decreases the liquidity of the investment. ARM's were designed to be an easy, low cost way for families to have residential property. When housing prices drop, so does the value of ARM's; hence, they aren't a fantastic investment.

More helpful hints The next proposed change is to allow FHA Guaranteed Loans to include non-traditional residential loans such as those from credit unions, co-ops and small lending institutions. Currently, FHA does not make any agreements with those lenders and does not accept Secured Loans. There are about thirteen distinct co-ops and credit unions with Secured Loan programs. These businesses provide a variety of different home finance options for homeowners.

The fourth shift is to eliminate the present income verification procedure and replace it with an automatic revenue verification system that is readily available for FHA guaranteed borrowers. Presently, the income confirmation is utilized to ensure that the application is in agreement with the particular consumer standards of the Housing Finance System. This is also utilized to determine whether or not a borrower is able to qualify for the mortgage according to their existing earnings and employment.

The last step in this analysis is to examine the credit risk of each guarantor. The current guidelines allow FHA guaranteed borrowers to borrow money from all mortgage guarantors, such as commercial real estate lenders, unless otherwise stated. According to the current guidelines, the three most credit risk groups are the higher risk, moderate risk, and also the minimal risk. The criteria for every credit risk category are based on the current financial and creditworthiness of each guarantor's credit and business history.

As we have seen, the current guidelines are inadequate in regulating the actions of mortgage guarantors. To effectively navigate the current mortgage guarantor marketplace, it's very important to mortgage brokers and agents to understand the various differences in the credit risk categories and how these differences relate to the different programs offered by the different guarantors. Mortgage brokers and brokers will need to get an understanding of how to assess the creditworthiness of mortgage guarantors then build an application bundle which best matches the needs of the debtor and the current real estate industry. With an comprehension of the current mortgage guarantor guidelines will help mortgage brokers and agents make sound lending decisions during the current poor economic times.