FHA reverse mortgage underwriting guidelines

Requirements for FHA loans are

Foreclosure is devastating, both financially and emotionally. It affects your feeling of security and belonging. Many times, you cannot recover this feeling until you are in your own home again. If you have experienced foreclosure, FHA loans are your best bet for qualifying for a mortgage after a foreclosure. The Federal Housing Administration, which guarantees loans underwritten according to their guidelines, insures these mortgages. FHA-approved lenders may choose to hold higher standards than the minimum FHA requirements on items such as credit scores, but most hold to the foreclosure guidelines.


In 2009, the United States saw nearly 3 million foreclosures, according to CNN Money. That was a 21 percent increase over 2008 and an over 100 percent increase over 2007’s number. This epidemic of foreclosures has made many lenders tighten up even more by increasing the amount of time after foreclosure that you can qualify for a conventional mortgage from four years to five years.


A wide range of circumstances can cause foreclosures: the death of a spouse, job loss, serious medical issues or divorce. Many of the foreclosures experienced in the 2000s resulted from the prevalence of risky interest-only and adjustable-rate mortgages granted to buyers with little to no down payment money. When the interest rates on these loans adjusted upward, homeowners who were just able to afford the initial payments found themselves unable to afford the new payment. The resulting late payments ate away at their credit and left them unable to refinance to a lower rate fixed loan. After the housing market began to fall in 2007, homeowners also lost the option to sell their home to prevent foreclosure, because many of them owed more than what they could get for the home.


After a borrower has missed several payments, the lender forecloses on the home, taking back the home and all of the equity in it. Some homeowners voluntarily surrender the home to avoid foreclosure in a procedure called deed-in-lieu of foreclosure. For the purposes of trying to qualify for a loan after the fact, underwriters treat these like foreclosures. Foreclosures are much more serious than even Chapter 7 bankruptcies in the eyes of underwriters, since the last thing a person will typically let go of is her home.


The FHA guidelines are very clear on loan approval after foreclosure. A borrower must have three years to the month from his foreclosure before a lender will approve him for an FHA loan. There are a few extenuating circumstances that may merit an exception. These include serious illness, death of a wage earner or other major catastrophe. These must have supporting documentation and a letter of explanation before an underwriter can consider an exception. Divorce is not an exception unless the home was current until legally transferred over to an ex-spouse, who then allowed it to foreclose. Job transfer or relocation does not qualify as a reason for an exception.

FHA backing away from Reverse Mortgages....

2009-09-22 15:05:48 by Apprsr

FHA Looking to Decrease Its Exposure to Reverse Mortgages
Reverse mortgage lenders are learning that the Federal Housing Administration is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage.

Declining home values squeeze reverse mortgages

2009-10-04 22:05:18 by Apprsr

Kenneth Harney
Sunday, October 4, 2009
(10-04) 04:00 PDT Washington - --
Declining home values have put a serious squeeze on one of the mortgage market's most popular and fastest-growing financing concepts: the Federal Housing Administration's reverse mortgage program for seniors 62 and older.
In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year

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