The lending and mortgage industry has changed substantially in a very short time period. Banks, mortgage brokers, appraisers, and title companies all have to work much more closely than before to resolve a transaction from contract to close. Starting in January, along with a completely new HUD-1 settlement statement there are new rules and guidelines regarding FHA loans. Since the majority of loans being processed right now are FHA loans, I thought it would be a good subject to touch on. Here are just a couple of ways that FHA Loan Standards are Changing…
1. FHA Streamline refinances as we know it are going away.
If a borrower wants to include closing costs in the loan, an appraisal will be required. Also, they will begin to document payment history and income for all FHA loans. Look for other changes to this program as well.
2. FHA will adopt HVCC standards.
Currently in place on conventional loans, HVCC standards ensure appraiser independence. What is HVCC? It’s the Home Valuation Code of Conduct and it was adopted by Fannie Mae back in July. These standards basically enhance the integrity of home appraisals within the mortgage industry. You’ll find the full code and frequently asked questions here if you’re interested.
3. FHA will reduce the appraisal validity period to four months.
Currently, the validity period is 6 months. Basically, because price changes are more rapid than they have been in the past, the FHA has decided to reduce the amount of time an appraisal is valid. So, an FHA appraisal will stay with the property regardless of borrower or lender for 4 months now, not 6.
These are just a few of the major changes shaking up the mortgage industry. It all means that you have to have your ducks more in a row than ever. I’ll talk more about changes that are happening industry-wide as they come about.
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