In recent days, stakeholders have come nearer to agreed on particular facets of housing finance laws reform. However, many gaps still exist. A number of housing bill bills are currently pending in both houses of Congress and there is still deadlock about the tax provision for home mortgage aid. Although, it’s expected that at some point, the enacted home bills will be voted out of committee and into the last house of Congress. There’s a need therefore for the home industry to be well prepared for the changes that are to come.

The House and Senate recently passed a Joint Resolution (JSR) proposing some changes in the FHA Home Loan Program that 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 exact same resolution. The Joint Resolution relies on altering the FHA’s Home Affordable Program (HAP) by increasing certain housing features, reducing or eliminating unnecessary fees, and loan restructuring applications. The upgraded housing features will, if passed on, affect the housing finance actions of FHA guaranteed borrowers.

The most publicized quality of the Joint Resolution is the provision which will enable FHA insured homeowners using a manufactured home or a Yurt to be treated as other residential properties. Many housing experts think that this change, if it is passed, will create the loss of many manufactured homes and manufactured home owners to the FHA. Although, this issue hasn’t been addressed yet. For the time being, homeowners that use a Yurt or a manufactured dwelling which is subject to this MMCAD app may continue using their houses as they are in these programs.

The second proposed change is to increase the maximum loan amount for first time home buyers and decrease the rate for adjustable rate mortgages or ARMs. At this time, there is no limit on the amount which may be borrowed and there is no limit on the interest rate. Manufactured housing investors have a difficulty when rates rise because this directly reduces the liquidity of their investment. ARM’s were designed to be an easy, low cost way for households to have residential property. When housing prices fall, so does the value of ARM’s; hence, they aren’t a fantastic investment.

The next proposed change is to permit FHA Guaranteed Loans to add non-traditional residential loans such as those from credit unions, co-ops and small lending institutions. Currently, FHA does not make any agreements with these lenders and doesn’t accept Secured Loans. There are about thirteen distinct co-ops and credit unions with Secured Loan programs. These companies offer a number of different housing finance options for homeowners.

The fourth change would be to remove the current income verification procedure and replace it with an automatic revenue verification system that’s available for FHA insured borrowers. Currently, the income confirmation is used to make certain that the application is in agreement with the particular consumer standards of the Housing Finance System. This is also utilized to ascertain whether a borrower is able to qualify for the mortgage based on their existing employment and earnings.

The final step in this investigation 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 property lenders, unless otherwise stated. According to the recent guidelines, the three main credit risk categories will be the high risk, moderate risk, and the low risk. The criteria for every credit risk category are based on the present financial and creditworthiness of each guarantor’s business and credit history.

As we have observed, the current guidelines are inadequate in regulating the actions of mortgage guarantors. To successfully navigate the present mortgage guarantor marketplace, it is very important to mortgage agents and brokers to understand the several differences in the credit risk classes and how these differences relate to the different programs offered by different guarantors. Mortgage brokers and agents need to get an understanding of how to rate the creditworthiness of mortgage guarantors then build an application package that best fits the needs of the debtor and the current real estate industry. Having an comprehension of the current mortgage guarantor guidelines can help mortgage brokers and brokers make sound lending decisions throughout the current poor economic times.