JUST BEFORE WE WRAPPED UP PRODUCTION OF THIS MONTH’S SCOTSMAN GUIDE,
THE FEDERAL HOUSING ADMINISTRATION (FHA) ANNOUNCED ITS LONG-RUMORED
CHANGE TO LENDER-NET-WORTH REQUIREMENTS.
As per its April 5 press release (
sctsm.in/FHAnet1) preceding the regulations themselves, FHA
is increasing the net-worth requirement for its approved lenders to $1 million from $250,000,
the level it had set since 1993. Lenders currently FHA-approved have one year from the date
of the rule to meet the requirement; within three years, the minimum increases to $1 million
plus “1 percent of total loan volume in excess of $25 million.” FHA small-business lenders’ net-worth requirement will be $500,000.
More important for mortgage brokers, the rule also shifts broker oversight from FHA to lenders. To originate FHA loans after Jan. 1, brokers must work with an FHA-approved lender. FHA
approval of individual originators will be history.
As FHA Commissioner David H. Stevens told us this past January (
sctsm.in/3916), “FHA does
not have the resources to monitor thousands of mortgage brokers and ensure that they’re
manufacturing loans appropriately.”
It’s a matter of risk management — something Stevens has publicly stated deserves FHA’s attention. After all, five years ago, FHA accounted for only 2 percent of all originations (sctsm.
With FHA’s solvency hanging in the balance, two schools of thought have emerged regarding
the FHA-approval move. On one hand, placing wholesale lenders as brokers’ FHA gatekeeper
inevitably will keep some folks out in the cold. Joining them will be the less-capitalized lenders
unable to claim the new net worth.
On the other hand, industry headlines greeted FHA’s early April change as indication of
FHA “going easy” on third-party originators. In a way, FHA did remove another barrier to
entry — the expensive annual audit for independently approved originators. Whether that
will have the net effect of increasing the number of FHA mortgage brokers, as FHA states,
or simply making them privy to the nonstandardized whims of individual lenders — rather
than the standardized whims of government — will be a concern worth noting through this
time next year.
5 YEARS AGO
From May 2005’s
“True happiness comes from being all
that we were meant to be in our lives. That
means being the best we can be both at
home and work. It also means putting
value in people, not possessions; charity,
not success; and giving, not receiving. Give
generously and live happily.”
— DALE VERMILLION,
VERMILLION CONSULTING INC.
“ACHIEVE TRUE SUCCESS: LEND A HELPING HAND”
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Pending home sales jump in February
as existing-, new-home sales fall
WASHINGTON, D.C. — Pending U.S. home sales jumped 8.2
percent this past February compared to the month prior,
showing signs the market would rebound in the spring, the
National Association of Realtors said.
The association also said existing-home sales decreased
6 percent in the same period to a seasonally adjusted annual sales rate of 5.02 million units, while the U.S. Commerce Department said sales of new single-family homes
decreased 2.2 percent in February compared to January.
The Realtors association’s Pending Home Sales Index increased in all regions except the West, where it fell 4. 8
percent to 98.
The existing-home-sales figure, down from January’s 5.05
million units, is 7 percent greater than February 2009, when
the annual sales rate stood at 4.69 million units.
Meanwhile, the annual rate of 308,000 new-home sales fell
short of the consensus forecast, which called for an annual
rate of 315,000, according to the Commerce Department.
Pending home sales: May 4
Existing-home sales: May 24
New-home sales: May 26
White House announces new
The Obama administration on March 26 revealed a new
program for U.S. homeowners that focuses on properties
valued at less than what is owed on the mortgages.
In a statement, the U.S. Treasury Department said the program, which will tap into $50 billion of Troubled Asset Relief
Program funds set aside for homeowners, would “balance
the need to help responsible homeowners struggling to
stay in their homes with the recognition that we cannot and
should not help everyone.”
The program shifts the focus from prior programs that focused on homeowners in financial trouble, The New York
March marks most jobs added
to economy in 3 years
WASHINGTON, D.C. — The U.S. unemployment rate held
at 9. 7 percent in March, with 15 million workers without
jobs, the U.S. Department of Labor said. The department
also said 162,000 jobs were added to the economy in the
month, the most in three years.
Christina Romer, chairwoman of the White House Council
of Economic Advisers, said the “encouraging labor market
news,” did not negate the point that “the American labor
market remains severely distressed.”
An average of 54,000 jobs were added to the economy
each month in the first quarter of this year. A year ago in
the same period, January through March averaged a loss of
753,000 jobs per month.
‘Mixed’ results follow January’s
Case-Shiller home-price report
WASHINGTON, D.C. — The monthly S&P/Case-Shiller report
on home prices showed that annual rates of decline slowed
this past January in two composite indexes.
Compared to a year ago, the 10-city composite index was
unchanged, while the 20-city index declined 0.7 percent in
January, the report said.
The annual rates have not been positive since January 2007,
according to the report.
David Blitzer, chairman of the S&P/Case-Shiller Home Price
Index Committee, called the report “mixed.”