January 26th, 2012 6:00 AM by Kathy Delbridge
HUD to Make Some Very Important Announcements Soon: Most Important Is Regarding Seller Concessions
In an announcement dated, January 20, 2012, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante announced the latest in a series of steps to protect and strengthen the FHA’s Mutual Mortgage Insurance Fund, while enabling the agency to continue to fulfill its mission to provide access to homeownership for qualified borrowers.
One of the biggest announcments we will see soon is that FHA will propose to reduce the maximum allowable seller concessions from its current level to one more in line with industry norms.
Part of the reasoning is they feel that current level of 6% allowable seller concessions exposes the FHA to excess risk by creating incentives to inflate appraised value.
I tend to disagree that it creates an incentive to inflate appraised values. There have been so many guidelines put in place over the last 2-3 years that, in my opinion, has eliminated any concern over any inflated values.
While I understand that FHA/HUD need to insure we are able to maintain and keep FHA financing available for homebuyers, I feel they need to really look at the root cause of loan defaults and solve that problem.
Many homebuyers really could use the assistance of seller paid concessions. If the value is there and it is not an artificially inflated value, I say let the homebuyer get in their new home with the FHA standard 3.5% down payment and keep the additional money it would costs them to cover their settlement charges.
On smaller purchase prices, the maximum allowable seller concessions is needed in most all cases. On a $150,000 purchase price, 3% will not cover ALL closing costs and prepaid items for a borrower.
In our current economy, let's help homebuyers keep those reserves for those unexpected occasions when those funds are really needed.
You can read entire Announcement from FHA by clicking on the following link:
http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-010
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