New Lifeline for Home Buyers by FHA (WSJ Reports)
In an article written recently in the Wall Street Journal, by Nick Timiraos–it is reported that (wisely), the FHA has shortened the waiting period for FHA loan availability for people who have been foreclosed upon. Since the FHA loans, at 3.5% down with extremely attractive 30-year fixed rate loans is a major vehicle driving buyers to market (especially in affordable markets such as the ones we are in), shortening the waiting period and making it easier for buyers to jump in will help values and demand, in my opinion. This will further increase the values in our target markets. The entire article is below.
New Lifeline for Home Buyers (by Nick Timiraos, WSJ 9/3/2013)
FHA Cuts Waiting Period to 1 Year for Buyers Who Earlier Faced Foreclosure
recent rule change lets certain borrowers who have gone through a foreclosure, bankruptcy or other adverse event—but who have repaired their credit—become eligible to receive a new mortgage backed by the Federal Housing Administration after waiting as little as one year. Previously, they had to wait at least
three years before they could qualify for a new government-backed loan.
To be eligible for the new FHA loans, borrowers must show that their foreclosure or bankruptcy was caused by a job loss or reduction in income that was beyond their control. Borrowers also must prove their incomes
have had a “full recovery” and complete housing counseling before getting a new mortgage.
their homes due to the recession — an effort that could widen the pool of potential homeowners. Nick Timiraos reports on the News Hub. Real-estate companies in bubble hot spots like Las Vegas and Phoenix already have stepped up marketing campaigns to attract these so-called “boomerang” buyers whose finances have improved after a foreclosure.
among the most flexible lending standards today, requiring down payments of just 3.5%. “It’s difficult to see how lenders would even consider doing mortgages with higher risk in the current environment,” said David Stevens, the chief executive of the Mortgage Bankers Association, who served as the FHA’s commissioner from 2009 to 2011. Lenders aren’t going to expand credit “while you’re suing them and threatening them over minor errors.”
The policy change reflects broader concerns among administration officials and federal regulators that the mortgage-credit pendulum has swung too far to the restrictive side from the days of lax lending rules that fueled the bubble. Some economists say too-strict credit standards are shutting out some creditworthy borrowers and holding back economic growth. Low participation in the recovery by young buyers “absolutely is a problem, and I’m not exactly an ‘easy credit’ guy,” said Thomas Lawler, a housing economist in Leesburg, Va.
homes had been lost to foreclosure. About 1 million borrowers who went through foreclosure during the crisis have already waited the required three years to be eligible for an FHA-backed mortgage, and by early next year that number could rise to 1.5 million, according to estimates from Moody’s Analytics.
what the federal entities require.
work, but if you have the financial goods, you get the loan,” he said. But Mr. Mohtashami said he isn’t concerned that the FHA rule changes invites a return to bubble-era excesses. “This can’t be
compared to subprime. The problem back then was that nobody was verifying anything,” he said. “This still requires people to qualify for the loan, verify the job, verify the assets.”