The Charge Risk At The Mortgage Guarantor Market

In recent days, stakeholders have come closer to agreed on certain facets of housing finance laws reform. But, many gaps still exist. A number of home bill bills are pending in both houses of Congress and there is still deadlock on the taxation provision for home mortgage relief. Although, it's expected that at some point, the enacted housing bills will be voted out of committee and to the last house of Congress. There's a need therefore for the home sector to become well prepared for the changes that are to come.

The House and Senate recently passed a Joint Resolution (JSR) suggesting a number of changes from the FHA Home Loan Program that will ultimately affect the housing market. The House has passed the joint resolution by a vote of 401-5; the Senate hasn't passed the same resolution. The Joint Resolution relies on altering the FHA's Home Affordable Program (HAP) by increasing certain housing features, eliminating or reducing unnecessary fees, and loan restructuring applications. The updated housing characteristics will, if passed on, change the housing finance activities of FHA insured borrowers.

The most publicized quality of the Joint Resolution is the provision that will allow FHA insured homeowners using a manufactured home or a Yurt to be treated like other residential properties. Many housing experts believe that this change, if it is passed, will cause the loss of several manufactured homes and manufactured home owners to the FHA. Although, this issue has not been addressed yet. For the time being, homeowners who use a Yurt or a manufactured dwelling which is subject to the MMCAD program may continue using their houses as they are in those programs.

The second proposed change is to increase the maximum loan amount for first time buyers and decrease the rate for adjustable rate mortgages or ARMs. Currently, there's absolutely no limit on the amount which may be borrowed and there is no limit on the rate of interest. Manufactured housing investors have a difficulty when rates rise because this directly reduces the liquidity of the investment. ARM's were designed to be an easy, low cost method for families to have residential property. When housing prices drop, so does the value of ARM's; therefore, they are not a good investment.

The next proposed change is to permit FHA Guaranteed Loans to include unconventional residential loans such as those from credit unions, co-ops and small lending institutions. Presently, FHA does not make any agreements with those lenders and doesn't accept Guaranteed Loans. There are about thirteen distinct co-ops and credit unions with Guaranteed Loan programs. 종로op These companies offer a variety of different home finance options for homeowners.

The fourth change is to eliminate the current income verification process and replace it with an automatic income verification system that is readily available for FHA insured borrowers. Currently, the income verification is utilized to ensure that the application is consistent with the specific consumer criteria of the Housing Finance System. This is also utilized to ascertain whether or not a borrower is able to qualify for the mortgage according to their existing earnings and employment.

The last step in this investigation is to analyze the credit risk of each guarantor. The current guidelines allow FHA guaranteed borrowers to borrow cash from all mortgage guarantors, such as commercial real estate lenders, unless otherwise stated. According to the recent guidelines, the three most credit risk groups are the higher risk, medium risk, and the low risk. The criteria for each credit risk category are based on the present fiscal and creditworthiness of each guarantor's business and credit history.

As we have observed, the current guidelines are inadequate in regulating the actions of mortgage guarantors. To effectively navigate the current mortgage guarantor marketplace, it is very important to mortgage brokers and agents to comprehend the various differences in the credit risk categories and how these differences relate to the various programs offered by the different guarantors. Mortgage brokers and agents will need to get an understanding of how to assess the creditworthiness of mortgage guarantors and then build an application bundle that best matches the needs of the borrower and the current real estate industry. Having an comprehension of the current mortgage guarantor guidelines can help mortgage brokers and brokers make sound lending decisions during the current poor economic times.

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