Tighter loan rules complicate short sales in San Diego

People looking at real estate in San Diego have likely been following borrowing trends and various loan relief efforts to explore their financial options. In a recent article in the San Diego Union-Tribune, real estate journalist Lily Leung reported that the Federal Housing Administration has been engaged in tweaking its program rules, which could potentially affect numerous loan applicants in the coming months. The source revealed that the changes are being done in order to improve revenue flows to the agency so that it can cut losses and avoid the necessity of money transfers from the U.S. Treasury in order to stay afloat.

What do the changes look like?
Leung reported that one of the most immediate changes is that new borrowers in the early part of 2013 will most likely be charged higher annual mortgage insurance premiums. While insurance premiums are currently at 1.25 percent, they are expected to increase to 1.35 percent of the loan balance.

In high-cost areas such as California, including San Diego, loans that are above the $625,500 mark, the annual premium is expected to increase from 1.5 percent to 1.6 percent.

FHA borrowers are primarily moderate-income, first-time home buyers - people with limited cash for down payments and less-than-perfect credit histories, according to the source.

Leung projected that the new changes to FHA's program rules will most likely "not be a major problem for most people, but it could cause some buyers to check out FHA's competitors private mortgage insurers whose monthly premiums on loans for applicants with high credit scores may be more attractive than FHA's."

Short sales complicated
Other recent news surrounding loans in San Diego include the growing trend of big banks selling servicing rights for delinquent loans to smaller companies. This type of loan sale has been complicating short sales. The REMI recently released a statement detailing the greater numbers of these types of sales and indicating that this is causing problems for San Diego distressed buyers who are attempting to conduct a short sale. Because short sales require the homeowners to gain permission from their servicer in order to execute a sale, when big banks sell loan servicing rights, they often disrupt short sales in progress and force homeowners to start the entire process over with their new servicer.