First Time Buyers Getting Off the Fence

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Was it the result of the recent rate hike, the reintroduction of the low LTV home loans by the GSEs, or maybe the FHA rate cut? Whatever it was, it appears many first time homebuyers are dipping their proverbial feet into homeownership waters.

According to recent reports, FHA-insured lending dramatically increased over the past year. In many cases, these FHA loans are used to finance the home of first-time buyers.

Many believe that the FHA’s rate cut, coupled with an improving economy has helped move many from renting toward their pursuit of the American Dream. Overall, the homeownership rate reported for the 3^rd quarter 2015 was up to 63.7% from 63.4% in the prior quarter.

This is great news for everyone. FHA is serving the needs of the first time buyers and this, in turn, produces more move-up buyers. Good for home sellers, Realtors, lenders, and the economy. It’s the way the system should work. The key is in the performance of these new first-time borrowers.

These loans not only represent the financing needed for these buyers to own a home, but they also represent investment vehicles for GNMA pools, the agencies, private investors, and in many cases the insurance premiums needed to sustain the FHA program. There is a lot riding on their continued long-term performance. Defaults could prove disastrous.

If you’re not now originating FHA loans, you may be missing out on a tremendous opportunity. When originated, approved and closed properly they can represent a profitable stream of business. They also represent more lending options for your clients and loan originators…as long as they are done right.

FHA now, like Fannie and Freddie, requires pre-closing audits. This is smart. Why wait until after a loan closes to find out you have problems.

Use these pre-closing reviews to quickly identify deficiencies to help develop a solid quality loan manufacturing process. In the long run, this investment in loan quality and compliance will pay big dividends.

To help you minimize costs, LoanLogics can help by performing your required pre and post-closing reviews, or through your use of our LoanHD quality control platform allowing you to complete more audits per person, in-house.

Don’t miss the boat because of fear, and cost, of quality and compliance. Go out and make some loans.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.