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Economic News

HUD guidelines are creating misinformation and scare tactics

This evening I received this forwarded email (below). It was from a local lender who sent it out, then it was forwarded to me.

The lender should have read the attached letter (in the email below), Mortgage Letter 2010-28 from FHA, before sending out a scare tactic letter like this. Yes, this is an excellent time for buyers who are considering writing an offer, especially with low interest rates and the upcoming changes to FHA, but please present the facts if you are going to send out letters like this.

This loan officer will not be let loose near my clients. I will continue sending my clients to a loan officer I can trust to tell them exactly what their costs will be. One who has a clear understanding of the FHA guidelines.

Can you imagine how this misinformation could harm a client?

They weren’t qualified for the correct amount and didn’t buy the home they wanted because they thought the payment was too high. Worse yet, they were never given the opportunity to look at a home they would have qualified for.

We are experiencing major changes this year and not just in mortgage financing. It is our job and fiduciary duty to our clients to stay educated about such changes. They are counting on us, especially when they are getting so much news from so many sources. It’s enough to make your head spin.

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Please Realtors and lenders, DON’T forward this email!

Email Begins Here————

See attached  letter from US Department of Housing and Urban development

This is bad news.

Today if a person is getting a $100,000 FHA mortgage the up front mortgage insurance is 2.25% or $2250 added on top of the loan.

And the monthly mortgage insurance is .55% annually or $45.83 monthly.

Under the new rules – a $100,000 FHA mortgage would have a 1% or $100,000 or less up front mortgage insurance added to the loan (depending on down payment %)

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But the monthly mortgage insurance increases to 1.55% of the original loan annually –
On a $100,000 loan that would be $1550 annually or $129.16 monthly-


This will make it more difficult for people to qualify for a loan.

If you have any buyers thinking about buying using FHA financing – the drop dead date is Oct 1st – we have to pull the FHA case number by that date to be under the

Old rules.   Otherwise – any FHA case # requested on or after Oct 4th, 2010 will go under the new rules.

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The buyer must have a signed purchase agreement for us to apply for the FHA case #.   The FHA case # can be gotten in 1 day.

Please keep this in mind for any clients you are currently working with.

Written By

Paula is team leader for The "Home to Indy" Team in Indianapolis . She is passionate about education and client care and believes an empowered client is better prepared to make good decisions for themselves. You'll find her online at Agent Genius,Twitter and sharing her insights about her local real estate market at Home To Indy.



  1. Jeff Belonger

    September 3, 2010 at 12:39 pm

    Paula… wow… first off, I thought maybe this post was about me.. lol Because I knew I had sent you an e-mail with an update on the mortgagee letter and what it means.

    Two things… number 1, yes, this is just bad… it’s aweful and yes, it does feel like a scare tactic to get people to jump high. But the worst thing about this is that this loan officers information is completely wrong. Congress approved the 1.55%, but FHA is only raising it to .85% and .90%

    So this loan officers calculations are 110% incorrect. And it’s sad, because I read a post about this on Active Rain, by a loan officer that stated the same thing in regards to the 1.55%. I wrote to her and to let her know that what she had stated was wrong. You know what her answer was? ” Jeff, thanks for letting me know this. I had tried to find out the correct information before I posted this, but the site was down and I knew that it was as high as 1.55% and after trying a few times, I just submitted this.. but I now have corrected this..” WOW… that to me is just horrible. Hey, don’t get me wrong, I am not perfect and make mistakes. But to tell me that it seemed like she wasn’t 100% sure, couldn’t validate her info, but wanted to get something out to her readers and to the public? Ouch.. rut row.. So I ended up writing about this… here is that post : And I mentioned that people have been putting the wrong information out there.

    Overall, I am glad that you wrote this and that it came from a realtor… thanks

    • Paula Henry

      September 3, 2010 at 4:57 pm

      Jeff – Thanks for your input! I knew you knew the facts! It is sad when industry professionals post incorrect data simply to get something out, without first confirming the facts. When I received this last night, I was first astounded, then angry because our clients deserve better.

      I emailed the agent who forwarded to me to let her know the numbers quoted her were not correct. Hopefully, she will believe me and confirm the facts herself.

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