The Federal Housing Administration announced that starting April 1 it will not insure mortgages to borrowers who have an ongoing credit dispute of $1,000 or more on their file.
To be considered for an FHA-backed loan, borrowers will either have to pay the remaining balance on the credit dispute or enter into a payment plan, making at least three payments on it. Any payment plans will need to be documented and submitted to FHA, which will then figure it into the debt-to-income ratio for the new mortgage.
FHA’s new rule does not include disputed credit accounts from more than two years ago or any related to reported identity theft.
Still, the new rule has some in the housing industry worried that it’s going to keep more potential home buyers from securing a mortgage.
“We expect this revision will certainly kick some buyers out of the marketplace, and we’re in ongoing efforts to quantify how extreme the impact will be,” Lisa Jackson, senior vice president of research at John Burns Real Estate Consulting, told HousingWire.
Jeremy Radack, a real estate attorney in Houston who assists with financing, estimated FHA originations may be reduced by 33 percent to 50 percent this year due to the new rule.
FHA says the rule is aimed at protecting the FHA’s emergency fund, which has fallen below the mandated amount Congress requires.
“We found that many borrowers with mortgage payment delinquencies had prior credit deficiencies including unpaid collections and unresolved disputed accounts prior to the approval of their loan,” the spokesman said. “This change was made to eliminate this layer of risk to FHA-insured loans and help protect our insurance fund.”
SOURCE: Housing Wire
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percent from the second quarter of 2011 through the first quarter of 2013 — but now they’re revising that forecast, realizing the housing market is stabilizing faster than they originally thought.
Of course, many renters are not in a position to buy. For one, it’s hard to get a mortgage these days, despite low rates. And paying rent can push them further away from being able to afford to buy.
In San Francisco, for example, studio and one-bedroom apartments sell for 13.1 times rent, while three bedrooms or larger sell for more than 18 times rent.
Lawrence Yun, NAR chief economist, said underlying factors are much better compared to one year ago. “The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” he said. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”
