Saving the American Dream!

URGENT!   ALL REAL ESTATE PROFESSIONALS, HOMEOWNERS & POTENTIAL HOMEOWNERS!

Consumers need your help in obtaining homeownership in our communities.  There are changes that have taken place in the industry that has affected homeownership of 85-90% of potential buyers and refinancing.  Please read the following letter and contact your state representative ASAP.  If additional information is needed please contact me immediately.

The reason for this letter is to identify what is going on in the homeownership marketplace with FHA and VA Loans today.  We need FHA/HUD and VA help right away.

 FHA was established in 1934, to help a certain class of buyers to purchase homes who could not get conventional financing.  Over the years FHA has done a wonder job in maintaining homeownership in our community; but what has happened is that we have allowed the banks and the financial institutions to modify FHA to look like a conventional loan%u2026keep in mind FHA is not credit score driven as well as what has transpired now FHA with credit scores started in 1998, FHA credit scores began at 500, 520, 530, 550 now 580 and two weeks ago to 620.  Since the credit score have been increased to 620, 95% of our homebuyers have been denied homeownership.

?         35 loans that were suppose to close in March due to changes of credit scores, 26 of these loans have been denied. All 35 loans meet FHA qualification.

?         If FHA keep allowing banks to use this method of qualifying, will continue to hurt many minority buyers.

?         Customer Jesus has been working on his job for five years and paying on his credit for three years with no late payments and credit score of 587; purchasing a $60,000 house; as a first time homebuyer and was denied homeownership based on credit score.  There are many customers like Jesus in our state and our country that will be denied homeownership due to these changes.

Banks and financial institutions are denying loans even if they are DU or LP approved; if they do not meet the bank credit score requirements.

Refinancing

FHA is not credit score driven.  Banks have modified FHA loans to look like Conventional loans which are denying customers the right to refinance for a lower rate based on their credit score.

?         With President Obama rolling out programs to assist people in refinancing, with the banks raising credit scores this will not allow customers to refinance.

?         Hope for Homeownership has been in existence since October 1, 2008 and to our knowledge no banks in the United States are doing this program.

?         What we need right away from FHA, Congress and the President is to have the banks and financial institutions held accountable for doing these programs that the government has initiated and not modify the programs.

 Banks and financial institutions are charging more to a customer based on their loan amount.

?         For example, Ms. Johnson buys a house for $60,000 and Ms. Smith buys a house for $100,000; Ms. Johnson will receive a higher rate than Ms. Smith even if the credit scores are the same.

?         If Ms. Johnson%u2019s credit score is 580 and Ms. Smith credit score is 600; it would cost Ms. Johnson money to get the same rate as Ms. Smith.

Mortgagee 2008-16 Letter

This mortgagee letter states that up front MIP and down payment will be based on credit scores%u2026if you are going to add credit scores to FHA financing this will hurt mostly African American and Hispanics in this market tremendously, because FHA was not design to look like a Conventional loan and we are allowing credit scores to dictate what prices and/or down payments; is going to be determine for particular clients.  We have been a FHA lender for 14 years and doing mortgages for over 25 years.  We need your help here in the Atlanta area now.  We need to move swiftly on these issues.  The character of the individual should not be determined by a credit score!

 Our parents bought homes without credit scores and still reside in these homes today after 30 years or more.

 VA loans are not credit score driven as well; banks and financial institutions require credit scores of 620.  So we have veterans that can not obtain homeownership at this time.  Keep in mind that we are in a war now - we have soldiers that have been fighting for our country and are coming home to find out that they can not obtain homeownership do to these same credit score regulations.

President Obama has a tax credit program for anyone who purchases a home this year will receive a 10% tax credit up to $8,000.  Do to the credit scores increasing; once more this will decrease the number of homeownership for many of the African American, Hispanic and Latino buyers.

 FHA or VA loans were not designed to get a buyer to go in debt to help raise their credit scores to purchase a home!  No credit...No scores!  No Home!

We need a since of URGENCY on this matter; if we do not address these issues immediately we will soon see an 85-95% decrease in homeownership in these communities in the next 30-45 days!  We need your HELP on requiring banks and financial institutions to do FHA and VA Loans as the guidelines required by FHA and VA Loans.

 This letter represents many mortgage, real estate and appraiser professionals.

 FHA Facts: Taken from the HUD website...

The Federal Housing Administration (FHA)

What is the Federal Housing Administration?

 The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

Why does FHA Mortgage Insurance exist?

Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property - whichever is longer.

FHA Loan Credit Issues

Before approving a loan, the lender analyzes the integrity of the borrower's past credit performance. Those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrower's whose credit history is marred by slow payments, poor financial judgment and a delinquent account is not a good candidate for loan approval.

No Credit History

Two lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.

 The History of FHA

Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965.

When the FHA was created, the housing industry was flat on its back:

?         Two million construction workers had lost their jobs.

?         Terms were difficult to meet for homebuyers seeking mortgages.

?          Mortgage loan terms were limited to 50 percent of the property's market value, with a repayment schedule spread over three to five years and ending with a balloon payment.

?         America was primarily a nation of renters. Only four in 10 households owned homes.

During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the war. In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately-owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA's emergency financing kept cash-strapped properties afloat.

The FHA moved in to steady falling home prices and made it possible for potential homebuyers to get the financing they needed when recession prompted private mortgage insurers to pull out of oil producing states in the 1980s.

By 2001, the nation's homeownership rate had soared to an all time high of 68.1 percent as of the third quarter that year.

The FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages since 1934. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.

In the more than 60 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world. HUD has helped greatly with that success.

FHA Mortgage Insurance

FHA loans are insured through a combination of a small upfront mortgage insurance premium (UFMIP), as well as a small monthly mortgage insurance premium. The UFMIP is often financed into the loan. Unlike other forms of conventional financed mortgage insurance, the UFMIP on an FHA loan is prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of his loan, he is entitled to a partial refund of the UFMIP paid at loan inception. If the LTV is 85% or greater (in other words, if the borrower has less than 15% equity in his or her home), then the monthly mortgage insurance premium paid is less than a borrower with a conventional mortgage and excellent credit would pay. In instances where the home owner has a poor to moderate credit history, his monthly mortgage insurance premium will be substantially less expensive with an FHA loan than with a conventional loan regardless of LTV - sometimes as little as one-ninth as much per month depending on the borrower's exact credit score, LTV, loan size, and approval status. The monthly mortgage insurance premium on an FHA loan has the ability to save a credit-challenged homeowner thousands of dollars per year depending on the size of his home loan, his credit score, and his LTV.

A borrower with an FHA loan always pays the same mortgage insurance rate regardless of her credit score. This is especially of benefit to borrowers who have less than 22% equity in their homes and credit scores under 620. Conventional mortgage insurance premium rates factor in credit scores, whereas FHA mortgage insurance premiums do not. When a borrower has a credit score under 620, conventional mortgage premiums spike dramatically. If a borrower has a credit score under 575, he may find it impossible to purchase a home for less than 20% down with a conventional loan, as the majority of mortgage insurance companies no longer write mortgage insurance policies on borrowers with credit scores under 575 due to a sharply increased risk. When they do write mortgage insurance policies for borrowers with lower credit receive a large percentage of their investment. The other three percent is received from the original down payment for the home.

A borrower%u2019s down payment may come from a number of sources. The 3% requirement can be satisfied with the borrower using their own cash or receiving a gift from a family member, their employer, labor union, non-profit or government entity. Since 1998, non-profits have been providing down payment gifts to borrowers who purchase homes where the seller has agreed to reimburse the non-profit and pay an additional processing fee. In May 2006, the IRS determined that this is not "charitable activity" and has moved to revoke the non-profit status of groups providing down payment assistance in this manner.

In order to qualify for an FHA housing loan, applicants must meet certain criteria, including employment, credit ratings and income levels. The specific requirements are:

?         Steady employment history, at least two years with the same employer.

?         Consistent or increasing income over the past two years

?         Credit report should be in good standing with less than two thirty day late payments in the past two years

?         Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.

?         Any foreclosure must be at least three years old

?         Mortgage payment qualified for must be approximately thirty percent of your total monthly gross income or less.

To date, FHA is one of two mortgage programs available to home buyers that will allow a purchase with only 3% (or 0%) down payment. That is legislated to change to 3.5% as of October 1st, 2008. FHA also has the most affordable monthly mortgage insurance available, and as mentioned previously in this article, mortgagees that do not have 20% for a down payment may be required to pay a monthly mortgage premium that is quoted by private (for profit) mortgage insurance companies. The monthly mortgage insurance premiums offered by private mortgage insurance companies can quickly make a home unaffordable to a less than perfect credit borrower.

Respectfully,

Tony Bryant

Tony Bryant Home Loans

404-384-6439

letsclose@tonybryanthomeloans.com