Archive for May 6th, 2008
Is FHA the New Pay Option ARM? – By Jeff Moran
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Like any American consumer product, mortgage loan products can become trendy. In 2005 and 2006, the Pay Option ARM was the coolest loan product on the planet. First time homebuyers across the country were lining up for 80-20% purchase loans with teaser rates starting at 1%. Who wouldn’t want 1% mortgage rate? Of course it was too good to be true as borrowers saw the negative amortization make their mortgage balances rise.
For the first time homeowners saw their mortgage balance larger than their mortgage limit and like a revolving credit card, it killed their credit scores. Borrowers found themselves stuck with an adjustable rate mortgage because there were no refinance loan programs available for sub 600 credit scores with no equity. Mortgage companies went out of business and homeowners began defaulting on their home loans like never before. Foreclosure ratios broke records in 2007 and in 2008 more foreclosures records will be broken.
Along comes the new FHA mortgage refinance…This government mortgage is as old as the great depression, but has with stood the test of time. In 2007 the FHA Secure and the 95% Cash Out Refinance was introduced by HUD. In 2008 Congress finally passed the economic stimulus package that mandated increased loan limits across the country. The raised FHA mortgage loan limits are helping borrowers refinance their 1st and 2nd mortgages into a better payment that they can afford.
FHA mortgage loans differ from option ARMs greatly. FHA loan terms are calculated with simple interest and provide a hedge against inflation because they are fixed for 15 or 30-years and there is no pre-payment penalty. Option ARM loans are calculated with negative amortization as the interest deficit is added to the principal balance and once the loan to value has reached 115% or 120% the payment rests to the fully indexed payment that carries an adjustable interest rate. After a few years, borrowers with option ARMs have reported payment hikes that doubled their monthly payments. FHA loans are not the new Option ARM’s! If you have a variable interest rate mortgage, consider refinancing with a FHA loan featuring a fixed rate for 30-years.
FHA Mortgage Loans remain the focal loan for mortgage lenders nationally. Jeff Moran is contributing finance writer who has experience with companies like Countrywide, Lennox, Nationwide and CFB Loan Services.
FHA Talk: Streamline Vs Rate and Term Refinance – By Paul Proffitt
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Borrowers ask me all the time…What is the difference between a FHA Streamline and a Rate and Term Refinance? These FHA loans are very similar but they do have there differences. First of all, streamline refinance loans are only available for homeowners who already have an existing FHA mortgage. If you have a FHA loan then you may qualify for a streamline refi, but you payment history needs to be perfect. FHA will not reward you with a streamline if you have been more than 30-days late on your existing FHA loan payment.
The 2nd major difference between a FHA Streamline Refinance and a rate and term refinance is that streamline refinancing ususally does not require an appraisal. Rate and term refinance mortgages will always be required to provide a new appraisal. In a declining market the appraisal can really define the loan. Since the FHA streamline waives the appraisal, the loan will typically close faster than a standard FHA rate refinance loan.
Of course there are some similarities between these two FHA loans. There is no cash out allowed in either FHA loan and both refinance products allow lending to 97.5% Loan to Value. Both FHA loans also require 1.5% mortgage insurance paid at closing and both allow the borrower to finance the insurance cost so they do not have to pay the closing costs “out of pocket.”
Paul Proffitt is a contributing finance writer for Nationwide and a Senior Loan Manager for CFB Loan Services. His published loan articles can be found online at sites like CNN and Nationwide Mortgage Loans.
FHA Single Family Originating Lending Areas
Posted by: | CommentsEach lender office has a “Lending Area” which is composed of clusters of States where a FHA registered branch or the home office of a FHA approved lender can originate new single family loans for FHA insurance. This geographic restriction does not apply to streamline refinance loans. In the FHA Connection, a lender can see the lending area of each of its registered branches and its home office under the section entitled Areas Approved for Business. The AAFB is a listing of all HUD field offices located in the States within the lending area and is located under the Institutional Profile tab in the Lender Approval section.
As long as the lender meets State requirements to be a mortgage broker or lender in a specific State, they can originate loans eligible for FHA insurance in any of States in their lending area. The following are the current lending areas:
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Lender Office |
States in Lending Area |
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Alabama |
Alabama, Florida, Georgia, Mississippi, Tennessee |
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Alaska |
Alaska |
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Arizona |
Arizona, California, Colorado, Nevada, New Mexico, Utah |
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Arkansas |
Arkansas, Louisiana, Kansas, Mississippi, Missouri, Oklahoma, Tennessee, Texas |
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California |
Arizona, California, Nevada, Oregon |
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Colorado |
Arizona, Colorado, Kansas, Nebraska, New Mexico, Oklahoma, Utah, Wyoming |
|
Connecticut |
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont |
|
District of Columbia |
Delaware, District of Columbia, Maryland, New Jersey, North Carolina, Pennsylvania, Virginia, West Virginia |
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Delaware |
Delaware, District of Columbia, Maryland, New Jersey, New York, Pennsylvania, Virginia |
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Florida |
Alabama, Florida, Georgia, Mississippi |
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Georgia |
Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee |
|
Hawaii |
Hawaii, Guam, America Samoa |
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Idaho |
Idaho, Montana, Nevada, Oregon, Utah, Washington, Wyoming |
|
Indiana |
Illinois, Indiana, Kentucky, Michigan, Ohio, Tennessee |
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Illinois |
Illinois, Indiana, Iowa, Kentucky, Michigan, Missouri, Tennessee, Wisconsin |
|
Iowa |
Iowa, Illinois, Kansas, Minnesota, Missouri, Nebraska, South Dakota, Wisconsin |
|
Kansas |
Arkansas, Colorado, Iowa, Kansas, Nebraska, Missouri, Oklahoma |
|
Kentucky |
Illinois, Indiana, Kentucky, Missouri, Ohio, Tennessee, Virginia, West Virginia |
|
Louisiana |
Arkansas, Louisiana, Mississippi, Texas |
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Maine |
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont |
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Maryland |
Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia |
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Massachusetts |
Connecticut, Massachusetts, Maine, New Hampshire, New Jersey, New York, Vermont, Rhode Island |
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Michigan |
Illinois, Indiana, Michigan, Ohio, Wisconsin |
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Minnesota |
Iowa, Minnesota, North Dakota, South Dakota, Wisconsin |
|
Mississippi |
Arkansas, Alabama, Florida, Louisiana, Mississippi, Tennessee |
|
Missouri |
Arkansas, Kentucky, Illinois, Iowa, Kansas, Missouri, Nebraska, Oklahoma, Tennessee |
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Montana |
Idaho, Montana, North Dakota, South Dakota, Washington, Wyoming |
|
Nebraska |
Colorado, Iowa, Kansas, Missouri, Nebraska, South Dakota, Wyoming |
|
Nevada |
Arizona, California, Idaho, Nevada, Oregon, Utah |
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New Hampshire |
Connecticut, Maine, Massachusetts, New Hampshire, New York, Vermont, Rhode Island |
|
New Jersey |
Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia |
|
New Mexico |
Arizona, Colorado, New Mexico, Oklahoma, Texas, Utah |
|
New York |
Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont |
|
North Carolina |
District of Columbia, Georgia, North Carolina, South Carolina, Tennessee, Virginia |
|
North Dakota |
North Dakota, Minnesota, Montana, South Dakota |
|
Ohio |
Indiana, Kentucky, Michigan, New York, Ohio, Pennsylvania, West Virginia |
|
Oklahoma |
Arkansas, Colorado, Kansas, Missouri, New Mexico, Oklahoma, Texas |
|
Oregon |
California, Idaho, Nevada, Oregon, Washington |
|
Pennsylvania |
Connecticut, Delaware, District of Columbia, Maryland, New Jersey, New York, Ohio, Pennsylvania, Virginia, West Virginia |
|
Rhode Island |
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont |
|
South Carolina |
Georgia, North Carolina, South Carolina, Tennessee |
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South Dakota |
Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wyoming |
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Tennessee |
Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Virginia |
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Texas |
Arkansas, Louisiana, New Mexico, Oklahoma, Texas |
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Utah |
Arizona, Colorado, Idaho, Nevada, New Mexico, Utah, Wyoming |
|
Vermont |
Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont |
|
Virgin Islands |
Puerto Rico, Virgin Islands |
|
Virginia |
Delaware, District of Columbia, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia |
|
Washington |
Idaho, Montana, Oregon, Washington |
|
West Virginia |
District of Columbia, Kentucky, Maryland, Ohio, Pennsylvania, Virginia, West Virginia |
|
Wisconsin |
Illinois, Iowa, Minnesota, Michigan, Wisconsin |
|
Wyoming |
Colorado, Idaho, Montana, Nebraska, South Dakota, Utah, Wyoming |