FHA announced several changes. Here are some highlights:
1) The temporary lifting on the 90 day flipping rule. The language does not make it very clear as to just what is required, and what liability the lender incurs. Bottom line is we all are waiting to see what the investors are going to do. Change is effective February 1st.
2) The MIP is going up to 2.25% and they also want to increase the monthly payment as well. The monthly premium increase requires congressional action but the up-front does not.
3) The seller credit is reduced from 6% to 3%. This could be a problem because of the way the way some banks and Fannie Mae like to do their contracts. By calling all closing costs buyer closing costs and then giving a credit for what the seller’s normal costs would be + what the buyer wants, this will severely limit the amount that Fannie Mae can pay. (Example: for a transaction in the city of Sacramento the seller’s normal closing costs would be about $2,700 – or 1.35% of the sales price. If all closing costs are considered buyer’s costs the seller could only credit 1.65% towards what we would normally consider buyer’s closing costs.)
4) Minimum FICO of 580 for 3.5% down. This probably is not much of an issue because we have very few investors will buy loans below 620 anyway.