Be Very Careful What You Say About FHA Foreclosures

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut NMLS #65149

In a Letter dated December 18, 2012, Acting Assistant Secretary for Housing - Federal Housing Commissioner, Carol J. Galante address four topics of concern for FHA.  On Saturday I covered the first topic that she coverd her letter FHA Clarifies Their Guidelines On Applying The 43% Debt-To-Income Ratio.  In this blog I will cover the forth topic that Galante addressed in her letter.  In the forth topic Galante expressed concern about Lenders who maybe understating the FHA Guideline on the waiting period after a Foreclosure.  In reading Galante's letter I take Galante's statement more of a warning to Lenders to "Be Very Careful What You Say About FHA Foreclosures" than a concern.

Galante's warning is to important in my opinion to summarize so I am going to quote it in it's entirety below:

"Access to FHA Loans After a Foreclosure:  Borrowers are able to access FHA -insured financing three years after they have experienced a foreclosure only if they have re-established good credit and qualify for an FHA loan in accordance with the fully documented underwriting requirements for any FHA-insured mortgage origination.  FHA is concerned that a few lender are inappropriately advertising and soliciting borrowers with false pretense that they can somehow "automatically" qualify after three years.  First and foremost, FHA will step up its enforcement for FHA-approved lenders with regard to such advertising and remind them of their duty to full underwrite loan applications in accordance with FHA guidelines.  In addition, the credit score/DTI policy outlined above will be applicable to borrowers seeking to obtain FHA insured financing following a foreclosure.  Furthermore, FHA is committed to performing additional data analysis to determine if the original cause of a borrower's foreclosure was do to a one-time economic event, such as the loss of employment that has since been regained, and whether that results in any different or better performance than other reasons for foreclosure.  This effort may inform future policies in this area.  Finally, as discussed in our annual report to Congress, FHA is also committed to structuring a new housing counseling initiative that would apply to a number of borrower classifications, including borrowers with previous foreclosures."

Lender's need to take this warning seriously, and I would also caution Realtors who I have seen inappropriately make similar statements in blogs here on ActiveRain.  I would be especially advise the so called Self-Proclaimed Short Sale Experts that have written blogs making it seem like it is a piece of cake to qualify for a FHA Mortgage right after a Short Sale

FHA is starting to clamp down on information being given to Borrowers.  While the above statement is being directed at Lenders, I would not be surprised if FHA widen their circle of whom they will go after for misleading statements about FHA Programs and Guidelines.  So a warning to everyone in Real Estate related Industries, Be Very Careful What You Say About FHA Foreclosures, Programs, or Guidelines.  Do not add or subtract from them, doing so may prove to be costly.

 

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 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Bob Ratliff, Broker Associate - REALTORĀ® 512-587-5689 02/11/2013 04:00 AM
  2. Lenn Harley 02/11/2013 05:07 AM
  3. Don Sabinske 02/11/2013 06:05 AM
  4. Joy Carter & Jeff Booker Brother and Sister Team 02/11/2013 11:03 AM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Real Estate Rookie
RealtorsĀ®
Mortgages
Be The Best In Your Field
The FHA Mortgage Group
Tags:
foreclosures short sales

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Rainmaker
632,076
Janis Borgueta
Key Properties of the Hudson Valley ~ 845-527-7115 - Newburgh, NY
LIC R.E Salesperson - Homes for Sale Newburgh NY

Good warning. I don't know the rules and always would send a client to someone who can guide them. 

Feb 11, 2013 12:02 PM #48
Rainer
51,139
M. Lynn Delatte
Developers Realty - Broadview Heights, OH

Thanks for the post.  My general approach is that I now very little about mortgage loans, and I will tell you even less. Since I do not deal with the ins and outs of mortgage financing on a daily basis, I tell my clients to talk to a lender who can review their situation.

Feb 11, 2013 12:12 PM #49
Rainer
164,663
Sajy Mathew
Coldwell Banker Select Professionals - Lancaster, PA

You have some of the most valuable post and I appreciate you sharing this info with the AR community!

Feb 11, 2013 12:40 PM #50
Rainmaker
195,930
Sarah & John Rummage
Benchmark Realty LLC, Brentwood, Nashville TN 615.516.5233 - Nashville, TN
BPOR, ePro, Realtor

Best to be vague since we don't have a crystal ball, nor are we lenders (who also don't have a crystal ball).

Sarah in Nashville

Feb 11, 2013 01:16 PM #51
Rainmaker
392,517
Inna Ivchenko
Mannis Real Estate Group - Calabasas, CA
Los Angeles / Valley Homes

One shall be always careful about making any promises or statements about foreclosures or short sales. I'm amazed how many posts i see here on AR: 'results garanteeed' for cash in short sales, time to close, credit promises, etc. Words 'results garanteed' are 'red flags'. Great post, George!

Feb 11, 2013 02:01 PM #52
Rainmaker
549,101
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

Some excellent words to the wise, George. That's why we leave mortgage matters to the real experts such as yourself! Thanks for the heads up!

Feb 11, 2013 02:01 PM #53
Ambassador
1,011,076
Harry F. D'Elia
Precision Real Estate Inc. - Phoenix, AZ
Investor , Mentor, CSSN, Radio Coach, REOs, ABR

Leave it to the experts. I am sure there are people always pretending to be experts when they are not. Speak to a pro today

Feb 11, 2013 02:12 PM #54
Rainmaker
287,575
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

Oh, I learned in the Military to NOT change any Government Agency's "wording".

Feb 11, 2013 02:22 PM #55
Ambassador
1,464,613
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George it is always wise  to have an expert in the field give the answer. In the area of lending I refer out to the lender.

Feb 11, 2013 02:24 PM #56
Ambassador
643,624
Doug Rogers
Bayou Properties Realty - Pineville, LA
Your Pineville Louisiana Agent

Thanks for sharing. With our constantly changing lending regulations, I NEVER try to predict who may/may not qualify years down the road.

Feb 11, 2013 03:03 PM #57
Rainmaker
1,229,409
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

Those guidelines make perfect sense.  As Doug states in his #57 comment, regulations are constantly changing and keeping on top of them is critical.

Feb 11, 2013 04:48 PM #58
Rainer
300,379
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Kimo's Lifestyle Solutions

Professionals know and follow the rules to remain compliant and anyone without a NMLS license shouldn't be making any statements or providing any information about mortgages, financing, rates, terms or eligibility requirements to consumers, shoulddn't they?

Feb 11, 2013 05:21 PM #59
Ambassador
1,294,888
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

I have seen those same blogs out there. Agents and lenders need to be so careful ...

 

Feb 11, 2013 06:53 PM #60
Rainmaker
348,539
John Juarez
The Medford Real Estate Team - Fremont, CA
CDPE, ePRO, SRES, GRI, PMN

Excellent information, George, as usual.

FHA is a guarantor of loans. FHA, for all of its faults – some true and some alleged but imagined – is trying to guarantee loans that have good prospects of being repaid. It only stands to reason that borrowers need to show good credit and job prospects for any loan especially those who have a past record of an FHA default.

“Fool me once, shame on you. Fool me twice, shame on me” should be the new FHA motto.

Feb 11, 2013 07:41 PM #61
Rainer
428,870
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

Somehow like everything else the government is invovled in the rules will change daily.

Feb 11, 2013 07:56 PM #62
Rainmaker
969,440
Joyce Kelley
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Thanks for sharing and I always can use the education. I have no faith in anything our goverment does

Feb 11, 2013 09:06 PM #63
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1,600,767
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 800-610-7253 DRE01267479 - Costa M

George - Important clarifications and a reminder that everyone needs to be circumspect in what they say.

Feb 11, 2013 10:44 PM #64
Rainmaker
124,275
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Great point. I read the quote the same way you do. There is no such thing as instant qualification. 

Feb 11, 2013 11:10 PM #65
Rainmaker
435,472
Nina Hollander
RE/MAX Executive Realty/Charlotte, NC - Charlotte, NC
Your Charlotte/Waxhaw/Fort Mill Area Realtor

Excellent point! Lots of people out there who think they can automatically qualify for new mortgages just because a certain amount of time has expired since a short sale or foreclosure or bankruptcy. Then they find out the hard way that it's more complicated.

Feb 12, 2013 01:35 PM #66
Rainmaker
58,003
Pete Baranowsky Jr
The Castle Team at Maximum One Realty Greater Atlanata - Dallas, GA
Selling Good Homes, Priced Right, Quickly

Terrific information.  With all the early foreclosures and short sales this is good to know as they come back into the market.  I knew I could count on a guy from my home town.

Feb 12, 2013 05:24 PM #67
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