Ada County December Real Estate Market Report is in…and it looks pretty darn good

January 18, 2012

By: Marc Lebowitz, Executive Officer, ACAR (Ada County (Idaho) Association of Realtors)

2011 December sales were 477 in Ada County, a decrease of 9% over December 2010.

Total sales for 2011 are 6,299; up 7% over 2010. In July of 2011, we exceeded YTD 2010 sales for the first time in 2011. This is our first year-over-year increase, without influence of the home buyer tax credit, in a few years. This is our first time crossing the 6,000 homes sold threshold since 2007…how long ago that seems!

Marc Lebowitz, ACAR Executive Officer, The Idaho Statesman calls Marc “the guy who’s always saying now is a good time to buy.”

December sales decreased 3% from November’s 487. Historically, December sales decrease from November.

Of our total sales in December… 48% were distressed….up 1% from November 2011. In January 2011, 57% of our sales were distressed. We have seen a mild overall increase in the percentage of sales in distress. In July we were down to 42% overall and have seen the amount increase one to two points each month.

For homes sold in December, the average number of “Days on Market” was 86. This is essentially unchanged from last month. Down from 90 days last year this time and down from 93 days in January 2011.

Pending sales at the end of December were 691; a decrease of 7.5% from the end of November. This represents the smallest number of pendings in 2011. That is fairly consistent with historical data. The percentage of pending sales in distress increased 1% from November, totaling 49% overall. This is the highest number of pending sales in distress we’ve had since early spring. Even so, we are now at eight consecutive months below 50%.

At the end of December, we had 20% more sales pending than at the end of December 2010.

December median home price held at November levels. Overall median price was $149,300; up 1.2% from December 2010. For all of 2011 our median was down 6.97%. That is a significant improvement from where we were in January 2011: down 20%.

New Homes median price for December 2011 was $223,739; an 24% increase from December 2010. Year-to-date new homes median is up 15% over 2010 to $237,500.

The number of houses available continues to decrease. At the end of December our total active inventory was 1,991 homes. This is down 9% from November and 25% less than last year at this time. Our inventory has fallen below where we would call the market “in equilibrium”. We are now in a “shortage”.

At the same time, the percentage of distressed active inventory held steady at 36%. We have been hovering between 33% and 36% since May. We remain well below the 40% levels set last spring….when we were on the increase.

In Ada Countywe have 4.2 months of inventory on hand…historically this number defines a strong “seller’s market”. The price category in shortest supply is <$119,000 with 2.5 months. In the range of $120,000 to $159,999 we have 3.9 months. All price points up to $400,000 have less than 5 moths supply. We have benefited all year from inventory levels much lower than national average. now, however, we are starting to see some slowdown in sales as the inventory continues to fall.

Based on December sold data, our most desirable price point is $120,000 to $160,000 which made up more than 20% of total sales.

There is no longer any doubt that, in Ada County, we have passed our “low water” point.

The challenge to our continued recovery is available product.

Talking with our 2012 President, Kit Fitzgerald, we don’t see new homes construction being able to keep up with the demand, especially as we move toward Spring.

Financing for builders is still extremely difficult to come by. In Kits words: “Without sticks in the ground, there is no excitement. Without excitement there is no sales growth.”

Sure, we will see median price increase over the next months, but when we get to April and the pent-up demand comes roaring out of winter hibernation…then what?

Another thing I learned from Kit…the desires of new home buyers have changed…about the lots they want to build on. Gone are the days when .13 acre was an acceptable lot size. Buyers now want .25 or more….and there’s very few of those anywhere in Ada County.

Its going to be an interesting Spring.

If I was listing and selling I’d be brushing up on my multiple offer negotiation skills and brush off those old escalation clauses….who would’ve thought?

(Reposted with permission.)

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Real Estate and Mortgage Predictions for 2011

December 29, 2010

With 2010 coming to a close, the “experts” are out in full force, making predictions for next year’s housing and mortgage markets on business television and in the papers.

Real Estate Predictions for 2011

Real Estate Predictions for 2011

Predictions for 2011 are wide-ranging:

The problem with housing and mortgage predictions is that — like all predictions — they’re just educated guesses about the future. Nobody knows what will really happen with the housing and mortgage markets in 2011. All anyone can do is theorize. As laypersons, though, it can be hard to separate theory from fact.

Television can make that task even more difficult at times.

As an example, when a well-dressed economist goes on CNBC and presents a clear, succinct argument for why home prices will fall on 2011, we’re inclined to believe the analysis and conclusion. After all, the outcome seems plausible outcome given the facts. But then, immediately after, a different economist presents an opposite argument — that home prices will rise in 2011 – and her analysis seems sound, too.

Even Freddie Mac can’t see the future.

Last year, the government group predicted mortgage rates to 6 percent in 2010. That never happened, of course. Instead, conforming mortgage rates dropped over a 7-month period this year to levels best be described as “historic”.  Freddie Mac couldn’t have been more wrong.

So, what’s a Boise homeowner to believe?

About the only thing that’s certain right now is that mortgage rates remain low by historical standards, and that home prices do, too. Also, that both housing and mortgage markets appear to be riding momentum higher into 2011.  This suggests that it will be more expensive to buy and finance a home by the end of 2011.

Until that time, however, predictions are just guesses.

Click on the picture to submit a secure online request for us to contact you

 

Call us with any questions you have relating to residential mortgages (208) 287-1717, we are always very happy to help. 

We specialize in home loans for first time home buyers, move up buyers, second home purchases, and resort lending. The loan products available to my clients include FHA, IHFA, VA, Conforming Conventional, Jumbo and Super Jumbo Portfolio.

Our primary markets are Ada County (Boise, Eagle, Meridian, Kuna, Star), Canyon County (Nampa, Caldwell, Middleton), and Valley County (Cascade, Donnelly. Tamarack, McCall).

(Waterstone Mortgage Boise)  (Home Mortgage Boise) (Secure Apply On-line)
 

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Rural Housing Program Restored

July 28, 2010

Last night Congress finally passed legislation to restore funding to the 502 single-family rural housing program.  Senator Michael Bennet (CO) and Reps.  Kanjorski (PA) and Capito (WV) championed this issue that has been working its way through Congress since March. 

The legislation will increase the guarantee fee for borrowers (but still allow it to be financed), which will make the program self-sufficient.  The legislation also increases the commitment authority so Rural Housing Service can formally guarantee loans (they had been providing conditional commitments).  We anticipate a notice from Rural Housing shortly after the President signs the bill.

Home Loan Boise  and Waterstone Mortgage – Prime Equity Group

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New HAFA Provisions for Boise Idaho

May 17, 2010

HAFA Provisions

The Home Affordable Foreclosure Alternatives (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.

  • Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
  • Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
  • Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
  • Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
  • Uses standard processes, documents, and timeframes/deadlines.
  • Provides the following financial incentives:
    • $3,000 for borrower relocation assistance;
    • $1,500 for servicers to cover administrative and processing costs;
    • Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
  • Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

There are also specific forms that must be used with HAFA…

  • Home Affordable Modification Program – designed to enable borrowers that meet eligibility requirements to avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term.
  • Second Lien Modification Program – designed to enable borrowers struggling with their mortgage to lower payments on second mortgages.
  • Home Affordable Foreclosure Alternatives Program – provides borrowers that do not qualify for a HAMP modification with options to avoid foreclosure through a short sale or deed-in-lieu.
  • Treasury FHA-HAMP – designed to enable borrowers with FHA-insured first lien mortgage loans, that are modified under FHA-HAMP, eligible for certain incentive payments under HAMP.

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Rural Development (RD) Loans, are they going going gone forever?

April 8, 2010

By Dean Tucker, Waterstone Mortgage – Prime Equity Group in Boise Idaho’s Treasure Valley

This week our industry lobby group met with staff for the Housing subcommittee in Congress to discuss our concerns regarding the Rural Housing guarantee program, and the imminent shortfall in funding authority. This follows up our letter to Congress of last week.

Here are the key points:

  1. Members of the Committee understand the issue and want to resolve it.
  2. There is no support for a supplemental appropriation — (i.e. additional spending bill). Congress is “spent out”, and there simply is no major spending bill on the horizon to which an RHS amendment might be added.
  3. The Committee appears open to a resolution in which the guarantee fee would be raised — perhaps to 3.5% from the current 2%. While this would add costs, the advantage would be that it would allow the program to operate self sufficiently without having to go back to Congress again.
  4. The sudden increase in the use of the RHS program is drawing scrutiny, including concerns by the administration about the zero down-payment feature of the program. There is concern that RHS is becoming a backdoor way to get around FHA in some areas. While this does not mean the administration would oppose self funding for the program, they may want to tie it to new program restrictions.

Real Estate professionals’ feedback and reaction to the prospect of an increase in the guarantee fee, as well as any other comments you may have are very welcome and encouraged. Please respond to this post.

Waterstone Boise

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FHA Program Adjustments to Support Refinancings for Underwater Idaho Homeowners

March 31, 2010

Posted by Dean Tucker of Waterstone Mortgage – Prime Equity Group in Boise Idaho

The Administration announced adjustments to Federal Housing Administration (FHA) programs that will permit lenders to provide additional refinancing options to homeowners who owe more than their home is worth because of large falls in home prices in their local markets. These adjustments will provide more opportunities for qualifying mortgage loans to be responsibly restructured and refinanced into FHA loans as long as the borrower is current on the mortgage and the lender reduces the amount owed on the original loan by at least 10 percent. This option should be available by the fall.

 The new FHA loan must have a balance less than the current value of the home, and total mortgage debt for the borrower after the refinancing, including both first and any other mortgages, cannot be greater than 115 percent of the current value of the home – giving homeowners a path to regain equity in their homes and an affordable monthly payment. This refinancing will help homeowners by setting monthly payments at affordable levels and decreasing the mortgage burden for families owing significantly more than their homes are worth. Keeping more responsible families in their homes should support the continued recovery of the housing market.

FHA Refinance Option 

1)    FHA Refinance Option for Underwater Loans –Encouraging Responsible Restructuring and Refinancing.

  • Voluntary option encourages lenders and borrowers to work together, when appropriate, to restructure underwater mortgages. Because it is voluntary for lenders, not all underwater borrowers who meet criteria below will receive an FHA refinance loan.
  • Enables refinancing into more sustainable loans that are no higher compared to the value of the home than the standard FHA refinance loan (97.75 percent).
  • Lenders write down principal of the original first mortgage at least 10 percent to reduce the debt burden on borrowers, though we expect the average principal write-down to be significantly more than that.
  • Enables refinancing to a reduced monthly payment at current low interest rates to facilitate affordable homeownership.
  • Homeowner Eligibility

               i)       Homeowners must be current on their existing mortgage. They must occupy the home as their primary residence, fully document their income and have a qualifying credit score.

              ii)     As with any loan forgiveness, this short refinancing should be reflected as a negative feature on a borrower’s credit score.

              iii)   Option is available to homeowners with mortgages not currently insured by the FHA.

2)    Incentives for Principal Write-downs on Second Liens

  • All mortgage debt including second liens must be written down to a maximum of 115 percent of the current value of the home to qualify for the refinance.

3)    Transparency on Impact of These Refinancings

  • FHA will publish data on number of loans, average percentage written down and quantity of principal reduced quarterly.

4)    TARP Funded Support to Expand Impact of Refinance Option

  • TARP funds will be made available up to a total of $14 billion to provide incentives to support writedowns of second liens and encourage participation by servicers, and to provide additional coverage for a share of potential losses on these loans.

The following information provides a brief overview of the key features of the refinance option. Detailed guidelines will be announced by FHA Mortgagee Letter.

1)    FHA Refinance Option for Underwater Homeowners – Encouraging Responsible Refinancings

  • Voluntary option for lenders and borrowers
  • Encourages lenders and borrowers to work together, when appropriate, to restructure debts

              i)       Qualifying first lien mortgage loans must have a minimum write-down of at least 10 percent and total mortgage loan to value on the home can be no greater than 115 percent after the refinancing

  • Eligible underwater loans are refinanced into new FHA loans on FHA terms for full documentation, income ratios, and complete underwriting
  • Terms of FHA refinancing:

              i)       FHA loan will be equal to no more than 97.75 percent of the value of the home

              ii)     Combined mortgage debt must be written down to a maximum of 115 percent of the current value of the home

              iii)   Standard FHA mortgage insurance premium structure will apply

  • Mandatory principal write-down as part of refinance

              i)       Minimum write-down by lender of 10 percent of the unpaid balance of the original loan

  • Affordable monthly mortgage payments to facilitate affordable homeownership

              i)       New monthly mortgage payment at current low FHA interest rate

              ii)     Total monthly mortgage payment, including for second mortgage, will not be greater than approximately 31 percent of income, and total debt service including all forms of household debt will not be greater than approximately 50 percent except for some borrowers with especially strong credit histories

  • Existing lenders can retain second mortgages on the property, but only up to a combined 115 percent of the current value of the home

              i)       If there is an existing mortgage that is not extinguished, holders must agree to resubordinate and write off any amount over 115 percent of the current value of the home

              ii)     The existing first mortgage is refinanced into a fully documented FHA insured mortgage at no greater than 97.75 percent of the value of the home

  • Homeowner Eligibility

              i)       Homeowners must be current on their existing mortgage payment

              ii)     Homeowner must occupy the home as their primary residence and fully document their income

              iii)   Homeowners must qualify under standard FHA underwriting guidelines

              iv)   Homeowners must have a FICO credit score of at least 500

              v)     Existing lenders/investors holding the first lien must agree to the principal write-down requirement. Thus, not all homeowners who meet above criteria will receive an FHA refinanced loan

              vi)   As with any loan forgiveness, the short refinancing should be reflected on borrowers’ credit score

  • Performance of these refinanced loans will not count against lenders for their Credit Watch scores, if the above parameters are met

2)    Incentives for Principal Write-downs on Second Liens

  • Incentives for immediate write-down of underwater second liens by lenders will be offered to encourage write-downs in connection with the FHA refinance.
  • An extinguishment schedule will be implemented based on the below taking into account the likely distribution of the second lien lenders that will agree to immediate write-downs

Table: Extinguishment Price Schedule: Per Dollar of Unpaid Principal

  Second Lien CLTV Range 
Combined LTV 105 to 115 115 to 140 > 140
Projected Schedule 0.21 0.15 0.10

 

3)    Transparency on Impact of These Refinancings

  • FHA will publish data on numbers of loans refinanced in this way including average percentage written down and quantity of principal reduced quarterly 

4)    4. Up to a total of $14 billion in TARP funds to expand impact of refinance option

  • TARP funds will be made available for incentives to support write-downs of second liens and encourage participation by servicers as well as the provision of coverage for some share of potential losses on loans. Total support provided through these three mechanisms will not exceed $14 billion
  • TARP funds will be used to provide coverage for a share of losses on loans up to a specified amount. The FHA will provide remaining loss coverage up to the maximum insurance coverage. Thus, the new lender will have a loan that is backed by the United States for up to 97.75 percent of the home value, as with other FHA refinance loans
  • TARP will purchase a letter of credit that will provide this loss coverage

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FHA Proposes Loosening its Flipping Rules

January 20, 2010

By Dean Tucker, Waterstone Mortgage – Prime Equity Group in Boise Idaho

It appears that starting February 1st, 2010, HUD / FHA is going to loosen their guidelines pertaining to property flips.

THIS IS HUGE!!! According to HUD’s Shaun Donovan, some of the restrictions will be temporarily lifted beginning February 1st to further promote home sales. Here are some basic guidelines we have been able to research:

  • The transaction must be “Arms Length”.
  • The seller MUST hold title to the property at the time of the sale.
  • There shall be no pattern or previous property flipping in the past 12 months.
  • The property must be marketed openly and freely (i.e. MLS).
  • If the home being “flipped” has a new sales price that is 20% + greater than the previous purchase price, then the seller must document any repairs and rehabilitation performed on the home and/or a 2nd appraisal will be needed and requested. (In these cases it should be expected that a home inspection will be required as well. Currently, FHA does not require home inspections OR termite / WDO inspections unless the contract calls for them. FHA only recommends the buyer order these services.)

Waterstone Mortgage Corporation is a true Mortgage Bankers, we underwrite and fund loans for over 30 of the top mortgage lenders in the country, the “Who’s Who” in mortgage lending. Our parent company, Waterstone  Bank, is $1.9 Billion strong.

(Home)

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FHA Announces Major Changes, Effective Immediately

January 20, 2010

By Dean Tucker, Waterstone Mortgage – Prime Equity Group in Boise idaho

This morning the FHA announced a series of changes designed to protect the federal agency that has emerged as the cornerstone of the mortgage market as the housing sector wobbles toward recovery. 

Consumers, Lenders and Realtors may find some of these new rules painful — but necessary.  With FHA hovering around 40% of all new loan originations, even these small changes have a major impact on the continued health of the housing market.

Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending.

  • The first step will be to raise the up-front MIP from 1.75% to 2.25% and request legislative authority to increase the maximum annual (paid monthly) MIP that the FHA can charge.
  • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
  • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
  • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

Update the combination of FICO scores and down payments for new borrowers.

  • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
  • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
  • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

Reduce allowable seller concessions from 6% to 3%

  • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
  • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

Waterstone Mortgage Corporation is a true Mortgage Bankers, we underwrite and fund loans for over 30 of the top mortgage lenders in the country, the “Who’s Who” in mortgage lending. Our parent company, Waterstone  Bank, is $1.9 Billion strong.

(Home)

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New rules at FHA could change the way first time home buyers in Boise Idaho purchase homes.

January 19, 2010

David Stevens bought his first home almost 25 years ago, paying just 3% down with a loan backed by the Federal Housing Administration. “I had no money in the bank,” he says. “If it weren’t for the FHA, I wouldn’t have gotten that home.”

Now, as FHA commissioner, Mr. Stevens has to decide how many others to let through that door. Souring FHA-insured mortgages are threatening the agency’s finances. Congress is pressuring him to tighten the easy-money standards that once helped people like him, and he is expected to announce revisions as early as this week.

But raising the credit bar could have a dangerous side effect. In many of the nation’s hardest-hit housing markets, the FHA backs around half of all new home loans. If the agency pulls back too quickly, the nascent housing recovery could fizzle, endangering the economy.

The dilemma puts the 52-year-old former mortgage banker squarely in the middle of the debate over how much the government should do to prop up the housing market, and how much risk taxpayers should take on to do it.

“How big a role do we need to play to keep the housing system functioning?” says Mr. Stevens, referring to the FHA. “Overcorrecting in either direction would be a terrible thing to do right now.”

Mr. Stevens is finalizing possible revisions to credit standards. Options include raising the minimum down payment, establishing a minimum credit score, increasing the amount that borrowers have to pay for mortgage insurance, and reducing the amount of money sellers can kick in for closing costs.

The FHA, created in 1934 to heal the U.S. housing market during the Great Depression, traditionally has helped first-time home buyers and underserved segments of the market. It doesn’t lend money to home buyers, but insures lenders against default on loans that meet FHA criteria, collecting fees for that backing. For decades, thanks to a stable housing market, it turned a profit for taxpayers.

When the housing market was booming, subprime lenders drew away many of the borrowers who traditionally used FHA-backed loans by offering even more favorable terms. Unlike the FHA, subprime lenders didn’t require borrowers to document their incomes. The FHA saw its share of the mortgage market fall to 2% in 2006.

(More) (Home)

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Taming the Wild West of FHA Lending

January 14, 2010

Some lenders fault the Department of Housing and Urban Development‘s plan to strengthen the Federal Housing Administration for — of all things — reducing regulation.

Waterstone Mortgage has a networth the exceeds the highest requirement as proposed by HUD.

HUD Secretary Shawn Donovan‘s road map, laid out in congressional testimony last month, was widely viewed as an attempt to raise the bar for companies to do business with FHA. Lenders’ net-worth requirements would rise, for example.

But critics of the proposal say HUD’s attempt to shift responsibility for supervising mortgage brokers from the department to FHA-approved lenders would eventually have the effect of lowering market standards. These lenders are urging HUD to keep its current requirement that brokers of FHA loans maintain a minimum net worth and provide the government with audited financial statements, just as lenders do.

Forcing lenders to monitor brokers without maintaining certain standards would result in a “race to the bottom,” said John Johnson, the president and chief executive of MortgageAmerica Inc., a Birmingham, Ala., lender.

Some lenders would ultimately give up standards to increase production, forcing others to do the same to compete, and repeating the cycle that helped to inflate the last housing bubble, he said.

“There should still be some standards to participate in FHA,” Johnson said. “Unless FHA revises the rule to include audited financials, then that will be the end of them because I can’t require them if the competition doesn’t.”

Similarly, Kevin Marconi, the chief operating officer at United Fidelity Funding, a wholesale and retail lender in Kansas City, Mo., said that rather than scrapping the net-worth minimum for brokers — as HUD has proposed doing — it should raise that requirement from the current $63,000 to somewhere between $100,000 and $150,000.

That would “weed out a lot of fly-by-night broker shops,” Marconi said.

Weeding out the chaff — among lenders and brokers — is certainly one of HUD’s goals.

Since the subprime market imploded in 2007, the FHA, once a mortgage industry backwater, has seen its volume explode.

FHA loans are pretty much the only product lenders can offer most borrowers who have little money for a down payment (unless they qualify for the government’s loan programs for veterans or rural residents).

FHA lending now accounts for 30% of all residential mortgages written, up from 3% in 2006, said Brian Chappelle, a partner at Potomac Partners, a Washington consulting firm.

Higher volume and share has come with higher defaults and losses. According to the Mortgage Bankers Association, 8.67% of FHA loans were 90 days overdue or in foreclosure at the end of the third quarter, up from 5.66% three years earlier. In November, a long-awaited audit showed that in the fiscal year that ended Sept. 30, the FHA’s capital reserve ratio had fallen to 0.53%, well below the congressionally mandated minimum of 2%.

The FHA now says it attracted companies with questionable practices during the growth spurt.

“The mortgage industry is coming out of an unprecedented period where unscrupulous players and institutions without capital, virtually anybody could put out a shingle and call themselves a mortgage lender,” Dave Stevens, the FHA’s commissioner, said in an interview in December.

The agency has stepped up enforcement actions against FHA lenders, including two that collapsed last year, Taylor, Bean & Whitaker Mortgage Corp. and Ideal Mortgage Bankers Ltd., better known as Lend America.

Opponents and supporters of HUD’s proposed rule agree on one thing: It would make the government mortgage market look more like the conventional one, as large bank-owned lenders gained share.

“HUD wants the bigger, more sophisticated, better-capitalized players out there,” said Paul T. Bossidy, the president and CEO of Clayton Holdings LLC, a Shelton, Conn., company that provides underwriting, due diligence and other services to lenders. The agency is looking for companies with the resources to invest in training and technology, he said.

As a wholly-owned subsidiary of a mid-sized depository Bank, Waterstone Mortgage is a fully approved HUD-FHA Lender. Our networth exceeds the higher $2.5M that HUD is proposing. The raised requirements are an excellent way to improve loan quality and help strengthen HUDs balance sheet. — Dean Tucker

Many small lenders said the proposed hike to their minimum net worth would put them out of business. HUD wants to raise the requirement from $250,000 to $2.5 million over three years. That would disqualify 70% of the FHA’s current roster of lenders (assuming none of them raised their net worth in the meantime).

“Big banks have a lot of expenses and no need to be competitive,” said Jeff Lewis, the chairman of Generation Mortgage Co., an Atlanta lender. “But there’s a mind-set right now in Washington that the best way to protect consumers is to restrict competition.”

Yet even some of the largest lenders want HUD to let brokers continue closing loans in their own name and maintain case numbers, to help the Goliaths manage their own risk.

For example, many lenders said they rely on the FHA’s Neighborhood Watch Web site to monitor and compare the default ratios of brokers.

“If HUD stopped providing compare ratios for correspondents, it is quite possible that loan quality would suffer,” Rick Aneshansel, the chief financial officer at U.S. Bank Home Mortgage, a unit of U.S. Bancorp, wrote in a comment letter — one of about 250 HUD has received since it issued the proposed rule in November.

David Moskowitz, deputy general counsel at Wells Fargo & Co., recommended in a comment letter that HUD maintain a recertification program for brokerages that includes background checks of key officers and directors and an assurance that brokers are not on any previous list of debarment.

Other changes to the FHA are coming quickly this year as well. Donovan has indicated that HUD may try to raise the current cap on annual mortgage insurance premiums, which would require congressional approval.

Policymakers also are considering increasing the minimum down payment for FHA borrowers and adopting a minimum FICO score for the first time.

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