But The FHA Guidelines Say So!?!

By
Services for Real Estate Pros with Auto & Home & Life Insurance throughout North Carolina

To spout off that we live in an interesting atmosphere in the mortgage lending business is akin to the genius next door proclaiming professional wrestling isn't real.  Yet, I shouldn't even get started on the latter.  And the former is quite diplomatic in the use of the word "interesting" rather than downright perplexing. 

Let's take for example the title of this post.  I get inquiries daily from Realtors, folks reading posts here on AR, fellow tenants in the building we rent, William Shattner, and former clients about the difference in what is said that can be done and what is actually done. 

"But there's no minimum credit score for FHA Loans," the informed consumer proclaims.  Even so, try finding me a lender or bank who will legitamately close and fund an FHA loan with a score below 620 these days and I will find you an episode of Charles in Charge that is remotely interesting.

You'll find similar discrepancies with Fannie Mae Guidelines.  One in particular, is how many mortgages on different properties that can be on credit before they will no longer lend you a dime.  If my facts serve me well, Fannie's Guidelines now allow up to ten.  However, few investors will even allow more than four.

(Of note, my opinion is if you open up the credit flood gates to quality Real Estate Investors, it will help curb what is wrong with the Housing Industry & the Economy... sooner rather than later.  That though, is another post in and of itself)

What we are experiencing is called lender overlays.  The guidelines say one thing, yet you come to find that lender's aren't abiding by that book of thinking.  The guidelines may say this, but the lender or bank says that.  Their pendulum is tending to swing a bit more conservative than the guidelines of Fannie, Freddie, or HUD for that matter.  While I can't rationalize the pool of brain cells planting the seeds for this line of business dealings, these are the facts right now.

The rules being laid out by the so-called "Big Dogs" are being tweaked a bit by the smaller puppies who are lending the money. 

This is an important reality to understand.  Credit Reporting Agencies, Mortgage Insurance Companies, Ballet Classes involving Mario Lopez, & Lender Overlays are wagging the tail of the mortgage industry.  It may not be fair.  It may not be rightIt may not be just.  But this is the hand that's being dealt, learn how to play the cards.

And deal with somebody who knows how to hold them.

Sorry, my first Kenny Rodgers reference of all-time... I believe.

 

~Of note, this post isn't copyrighted and feel free to copy and paste it wherever you want.  I'm tired of a litigious society of lazy people and frivilous lawsuits.  You want to publish this, go right ahead.  Just try to convince them on a second post that this crap was really yours.~

Jason Sardi

Mortgage Consultant & Fellow Human Being

jsardi@ihmci.com

610-653-0317

 

 

 

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Ambassador
2,392,302
Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital

Jason, I'm glad I read your entire post before commenting, or I'd have missed your disclosure!  Love it!

Aug 08, 2009 12:49 PM #1
Rainmaker
199,216
Jennifer Monroe
Savvy + Company Real Estate - Charlotte, NC
Real Estate REALTORĀ®/Broker in Beautiful Charlotte

Who would have thought that the 'industry' is playing by it's own rules these days? I wouldn't have even thought to ask if the published guidelines were relavent or not. So glad you laid it out for us. But to me, it sounds a lot more like a Lender Underworld than a Lender Overlay.

(p.s. I quite adore your crap!)

Aug 08, 2009 01:17 PM #2
Rainer
39,391
Brian Ferrick
Treadstone Funding - Grand Rapids, MI

Well put..banks dont put well thopught out business decisions in coming up with reasons to lend or not to lend...many people are getting loans they shouldnt and people who should get loans don't...it will probably take a year or two to get more consistent lending practices..

Thanks,

Brian Ferrick

Aug 08, 2009 01:21 PM #3
Rainer
39,391
Brian Ferrick
Treadstone Funding - Grand Rapids, MI

Well put..banks dont put well thopught out business decisions in coming up with reasons to lend or not to lend...many people are getting loans they shouldnt and people who should get loans don't...it will probably take a year or two to get more consistent lending practices..

Thanks,

Brian Ferrick

Aug 08, 2009 01:22 PM #4
Ambassador
495,917
Brian Schulman
Coldwell Banker Select Professionals, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

Jason, it's too bad that we have to be looking over our shoulders constantly to avoid frivolous litigation.  That's not what America is supposed to be about.

Aug 08, 2009 02:28 PM #5
Rainmaker
860,109
Steve Loynd
Alpine Lakes Real Estate Inc., - Lincoln, NH
800-926-5653, White Mountains NH

Jason, when you get right down to it there is always more said than done...that is the nature of our society. Let's talk about how to fix it rather than really fixing it. I must say I'm impressed with the Charles in charge , Mario Lopez , Kenny Rodgers and William Shatner referencess...those are hard to work into a discussion of credit scores and mortgage guide-lines (p.s. I agree if investors were able to borrow on more asset they would stem this tide...they are the experts on making money in real estate not the poor bum that didn't know what they were signing). Peace out!

Aug 08, 2009 02:50 PM #6
Ambassador
738,737
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Jason....  WRESTLING is FAKE...  lol   Hey, I never did say that the people that wrestle are, because you still have to be a very good athelete and able to twist your body in ways that I couldn't never imagine...

But back to your blog...  yes, some good key points.  Lender overlays... and I loved some of your references, which made this post funny at times.  But as yourself, it kills me when a client says... well, on HUD's site it says that FHA doesn't care about credit scores... but wait, they actually do if you read further or know what to look for. This was changed back in October of 2008, that if you have a credit score under 500, you have to put at least 10% down.  But that's irrelevant, because as you mentioned, show me a lender that can do under 620.  Yes, I know one major one that can do down to 530, but not only are they extremely hard to close, but you will pay out the ying yang for them also...  why not get your score up in a year.. because you know what, you would have paid for it a lot more now by going with that company with your 530 credit score. Sure, you can refinance, but Mr. Idiot, that costs money also.  Sure, you can do a FHA streamline refinance, but stop reading the adds that say... no closing costs, no application fees, etc, etc.  I must digress then...  Hey, good, comical post, that gets a basic point across.

jeff belonger

Aug 08, 2009 03:15 PM #7
Ambassador
507,082
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Patricia -  It's always important to read the disclosure(s).  Besides, I kind of miss disclosures that make me smile;)

MJ - Underworld, overlay, you get the point.  It's quite interesting and it's probably not something a lot of people even realize these days.  By the way, I know a 6'2" 195lb gent who writes crap and adores you as well;)

Brian - While I don't make it habit to pretend that I know how to lend money if one is a wholesale banker these days, I'm starting to pretend I just broke that habit:)

Brian Schulman - I concur.  I've been playing around with the idea of going back to school and studying law.  In my view, this has been something we've been dealing with way too long.

Steve -  Thank you on the references, I killed 76 brain cells trying to work them into this brief discussion;)

Belonger - Thank you, I believe you just got what pro-wrestling is really all about.  As far as the true nature of this post, I think you got that as well.  You may just be smarter than the average lender;)

 

 

Aug 08, 2009 07:47 PM #8
Anonymous
Anonymous
Steve Bamberski

Hi Jason,

As always your posts are informative and thought provoking. If I had a nickel for everyone who says to me" but the guidelines say" well you know where that is going. Anyway there is a program that truly has no minimum credit score and no risk overlays if you are purchasing in the state of PA. It is the Pennyslvania housing Finance Authority's Home Loan Program and it is available to anyone purchasing in the stae of PA. if you would like more information let me know.

Thanks,

Steve

 

Aug 08, 2009 09:00 PM #9
Ambassador
507,082
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Bamberski - It's nice to see you are still in the biz.  You are a warrior, for sure.  As far as the program you outline, I'll let you know.  I'll let anyone I come across know about that option.  Reading this, they probably already have a good idea.....

Aug 08, 2009 09:27 PM #10
Rainmaker
641,954
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Jason,

ROTFL at your disclaimer...!!! Thanks,   Fran

Aug 08, 2009 11:11 PM #11
Ambassador
507,082
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Fran - You can always steal borrow it if you want:)

Aug 09, 2009 06:15 AM #12
Rainmaker
574,610
Neal Bloom
Keller Williams Properties, Weston FL - Weston, FL
Realtor CRS-Weston FL Real Estate

I'm still not feeling it with FHA loans. I feel it's still limiting buyers on the choices of properties. It's virtually impossible for them to buy an REO or a foreclosure because their at the mercy of the banks and the people who claim to be the owners. Just my experience of seeing this.

Aug 09, 2009 08:21 AM #13
Ambassador
738,737
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Yogi Bear

 

Sardi.... nah, I am just smarter than the average bear.  ;o)

 

 

jeff belonger

Aug 09, 2009 08:29 AM #14
Ambassador
507,082
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Steve-O Bamberski - Send me some of that info, I'm curious all of a sudden;)

Neal - Their limitations are much less restricted than they once were, I do believe.  Perhaps you need to talk to a different lender;)  Seriously, they shouldn't be nearly as much of an issue in your area than the HVCC Guidelines for appraisals on Conventional Loans.

Belonger - I wouldn't go that far:)  Yogi has you beat in the IQ department by at least 20 points... and he's sitting at 119.

 

Aug 09, 2009 08:55 AM #15
Rainmaker
400,493
Nevin Williams
Sierra Pacific Mortgage Raleigh - Raleigh, NC
Raleigh Mortgage Pro

Jason - "But there's no minimum credit score for FHA Loans," the informed consumer proclaims.  Even so, try finding me a lender or bank who will legitamately close and fund an FHA loan with a score below 620 these days and I will find you an episode of Charles in Charge that is remotely interesting.

 

Sorry...I couldn't help myself!  I hear their rates are reasonable (so I hear)

First Guaranty Mortgage Corporation
Wholesale FHA & VA lender
 
We are still one of the only lenders in the nation financing borrowers with scores below 600.  We require a 530 score.  We boast an array of programs including manually underwriting both FHA & VA loans.  We have and will continue to be ahead of the pack when it comes to rolling out new programs allowing our affiliates to reach out to a larger pool or prospects.  We currently offer the following:
 
- FHA & VA manual underwrites with a 530 score requirement
- Chpt 13 buyouts
- USDA purchase only (requires 580 score)
- Manufactured housing (requires 620 score for existing)
- 1xclose for Manufactured and Modular construction with a 580 score
- 203K Streamline with 580 score
- $100 down in conjunction with 203Ks
- Multi-Unit (up to 2 units - refinance only with 580 score)
- FHA streamlines on month by month bases with 620 score and DU
   Approve/Eligible findings
 
***Special incentive pricing each month for all loans with scores of 660 or more and DU/LP Approve/Eligible findings***
 
You can view our rates at fgmcwholesale.com (username:  sales  password:  sales123)
 
Please call me today - I look forward to hearing from you!
 
Billy Donnelly and Steve Yohler
Account Executives
bdonnelly@fgmc.com
BILLY DONNELLY
571-268-3728 cell
866- 914- 8239  efax
STEVE YOHLER
703-585-3984 cell
800- 509 -9802  efax
syohler@fgmc.com
FIRST GUARANTY MORTGAGE CORPORATION
5303 Spectrum Drive Suite K
Frederick, MD 21703
FGMC FHA ID# 7516800469

 

Aug 10, 2009 08:04 PM #16
Ambassador
507,082
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Nevin - I'm vaguely familiar but I'm not holding my freaking breath.

Aug 11, 2009 11:09 AM #17
Rainmaker
598,880
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Jason - I'm feeling your pain, my friend.  I just spent the last two days trying to fulfill a lender condition (not an FHA condition) that was so absolutely absurd.  Try as I did, I could not completely fulfill the condition and it would of taken an act of Congress to completely fulfill the condition to the lenders satisfaction.

When I explained to the underwriter what my clients and I had to do to get what we got, she refused to sign off on the condition.  Thank God for Escalation Team Managers!  Just the thought that we now have to speak with Escalation Team Managers in order to close a loan is absolutely frightening, especially a loan that just a year ago would have been considered an A loan - great ficos and credit history, long & steady income and residence, low dti's, more than sufficient reserves and less than zero payment shock (mortgage is more than $300 less than their rent).  WTF????

Aug 29, 2009 12:58 PM #18
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