Round Rio Rancho

Q: I have been looking for a home to buy, maybe in Northern Meadows as soon as I have the down payment saved. I am prequalified for an FHA mortgage, which means I’ll only need to save 3.5% of the purchase price. My concern is that I’ve read that the FHA may be insolvent soon because of their foreclosure losses over the last few years. What should I do? Celestina in Rio Rancho

A: In November 2012, the FHA held a press conference and did indeed disclose that their capital reserve ratio of the MMI Fund (Mutual Mortgage Insurance) used to support FHA’s single family home and reverse mortgage insurance programs were at a negative 1.44 percent. Without explaining the math, their reserves against losses are well below where they should be. In spite of this, the FHA is backed by the federal government (that means you and me, the taxpayers) and they will not be defaulting anytime soon. However, the FHA mortgage program is supposed to be self sustaining, so they do have to make changes. Earlier in 2012 the FHA raised the amount paid for up front mortgage insurance from 1.25% of the loan amount to 1.75%. This increase started to rebuild the reserve funds, but it wasn’t enough.

FHA mortgage holders not only pay the up front mortgage insurance, but they also pay a monthly mortgage insurance fee. In 2012 the rules read that after at least five years and if the mortgage balance has fallen below 78% of the home’s value (based upon the scheduled principal reduction), a borrower could stop paying the monthly mortgage insurance. On a $150,000 mortgage, would mean a reduction in the mortgage payment of $156.25 (at the 1.25% rate). On January 31, 2013 the FHA announced that they were making the monthly mortgage insurance permanent on all their new loans. Starting June 1st, 2013, new FHA loan holders will contribute this money every month for as long as the loan stays in place. The amount of the monthly mortgage premium payments will also go up by about 8% on new loans starting April 1st, 2013. (The above effective dates are not the date the transaction closes, but the date the lender gets a new case number for your loan in process.) These permanent payments will help rebuild the FHA reserves. If you are considering making a purchase utilizing FHA financing, you might want to get off the fence and find a home prior to this policy change going into effect. If you already have an FHA loan, the original terms will not be changing.

Q: I drive up and down Unser Blvd. practically every day, and I’ve noticed crews working on the 4-plexes that were never finished near Abrazo and Unser. What are they going to do with that project? Can I buy one of the buildings for investment when they are done? Larry in Rio Rancho

A: We’ve been asked about this project every month for the last couple years, and we’re happy to finally be able to give an uplifting answer! First, here is the history of the project: The units were originally built as standalone 4-plexes to be sold individually to investors. The construction was being financed by First Community Bank. First Community was closed by NM State Regulators in January 2011 and sold by the FDIC to U.S. Bank. When the bank closed, the builder’s access to the funds needed to complete the project disappeared. Since First Community was closed due to allegedly making bad commercial real estate loans, US Bank couldn’t very well make the same mistake, so the project was effectively shut down. The buildings were foreclosed upon and sat, deteriorating for a long time. They were purchased by the Lissoy Family Trust in the Summer of 2012 and planning to complete them was begun. Engineers evaluated each structure, some of which were pretty much completed, and some that never even got wrapped and stuccoed. According to Scott Lissoy, who is heading up the project, any deteriorated materials have been repaired or replaced and interior work is progressing.

The project’s original name, Puerto del Sol may or may not survive, but the owners have big plans. 18 additional buildings are underway, for a total of 128 units when the project is complete. None of the buildings will be sold, as was the original plan. All will be leased to tenants, starting in Spring, 2013. The new plan includes a clubhouse with a gym, a tot lot and an outdoor pool. All the units are 3 bedrooms, 2 baths and between 1040 and 1140 square feet. Each unit will have a single carport for covered parking. The upstairs units will have a fireplace and vaulted ceilings. Plans call for upgraded kitchens with slab granite counters, stain grade cabinets and stainless steel appliances. Some of the upstairs units should have really great views of the Sandias as well. It sounds to us like this will be a great final outcome for this project, which has been an eyesore for so long.