Written By: Bonnie Wilt-Hild, Op-Ed Writer
As we are all aware, FHA has seen many changes this year regarding the overall program. Much of these changes were implemented to assist with the ongoing housing crisis and have actually been quite effective, however, the overall changes to the program have not been designed to elevate the newest credit crunch, but to revamp the overall program.
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These changes which began for the most part in 2005 have included doing away with non-allowable closing costs to an extent and modifying appraisal protocol to resemble that of FNMA among other things. Most recently we have seen FHA move away from the Mortgage Credit Analysis to the 92900LT, which will be mandatory for use beginning October 1, 2008 along with the multitude of other changes which will be begin on this date as a result of the passage of The Housing and Economic Recovery Act of 2008.
For as much as many industry professionals, particularly those with extensive experience where the government programs are concerned, have deemed these changes as a dumbing down of the program, I am here to say that this is not the case at all. As one of those professionals who would state that their expertise lies in government lending, I see these changes as not only a way to boost the housing industry overall, but to make the FHA program less cumbersome overall.
As we all know, many industry professionals moved away from FHA in the late 1990’s due to the cumbersome nature of the program. Many property sellers did not want to participate in government contracts due to the appraisal protocol and sometimes lengthy repair items that would result during the property appraisal piece of processing. As a result many FHA qualified borrowers turned to less favorable mortgage products such as sub prime and higher interest rate Alternative mortgage products which most recently contributed to the current problems plaguing the mortgage industry and have more often then not, has had a huge impact on low to moderate income borrowers who seem to have suffered the most.
To say that FHA is dumbing down the program is far from correct. I will agree that with minor alterations to the program they have simply made it more accessible to the masses due to it now less cumbersome nature and the average lenders new willingness to participate in the program. For those of you thinking, “What about down payment simplification”, I will remind you now of the Acquisition method, 97/95/90 calculation and so on.
When FHA went to the 97.75/97.15 LTV calculations we all applauded and were able to increase underwriting production by 30% (yes it took that long just to calculate the loan amount). At any rate, remember the program changes will benefit the borrowers in long run while making it just a little easier for production staff.
As a normal course of business the LT will be far less work to complete and calculating loan amount will now be more standard making our life just a little easier. Keep in mind however the program overall remains unchanged and although loan amount calculations have gotten a little easier, we are not underwriting FNMA programs. The guidelines are still the guidelines and they are somewhat different that those of conforming products.
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Also, there is still the premise of manual underwriting which will always set FHA underwriting apart from Conventional underwriting. To say that any mortgage program that allows an underwriter the ability to make the final loan decision is elementary is a huge mistake not to mention an understatement of the true nature of assessing financial risk.
With that said, I suggest that we not become complacent as the nature of the program changes because our responsibilities as underwriters have not. As always, happy underwriting.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie holds mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".
