Posts Tagged ‘Department Of Housing And Urban Development’
Obama administration: $208.4M to stabilize Fla. neighborhoods
The U.S. Department of Housing and Urban Development (HUD) awarded an additional $208,437,144 in funding to Florida communities struggling to reverse the effects of the foreclosure crisis, the third round of funding through HUD’s Neighborhood Stabilization Program (NSP). To kick off the Florida funding – part of a $1 billion package for all states – HUD Deputy Secretary Ron Sims joined Congresswoman Kathy Castor yesterday in Tampa, which will receive $4.7 million for local foreclosure efforts. “We want to make certain that we target these funds to those places with especially high foreclosure activity so we can help turn the tide in our battle against abandonment and blight,” said Sims. “As a direct result of the leadership provided by Senator Chris Dodd and Congressman Barney Frank, who played key roles in winning approval for these funds, we will be able to make investments that will reduce blight, bolster neighboring home values, create jobs, and produce affordable housing.” The funding is provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act. To date, there have been two other rounds of NSP funding: the Housing and Economic Recovery Act of 2008 (HERA) provided $3.92 billion, and the American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated an additional $2 billion. Like those earlier rounds of NSP grants, the new targeted funds will be used to purchase foreclosed homes at a discount and to rehabilitate or redevelop them. State and local governments can use the grants to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer downpayment and closing cost assistance to low- to moderate-income homebuyers (household incomes not exceeding 120 percent of area median income). In addition, they can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property. HUD will issue an NSP3 guidance notice in the next few weeks to assist grantees in designing their programs and applying for funds. In addition to the third round of NSP funding, the Dodd-Frank Wall Street Reform and Consumer Protection Act creates a $1 billion Emergency Homeowners Loan Program to be administered by HUD. The program will provide up to 24 months of mortgage assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition. HUD will announce additional details, including the targeted areas and other program specifics when the program is officially launched in the coming weeks. In the third round of grants, the following cities and county governments will receive: Boynton Beach – $1,168,808 Brevard County – $3,032,850 Broward County – $5,457,553 Cape Coral – $3,048,214 Charlotte County – $2,022,962 Citrus County – $1,005,084 Clearwater – $1,385,801 Collier County – $3,884,165 Coral Springs – $1,657,845 Davie – $1,171,166 Daytona Beach – $1,127,616 Deerfield Beach – $1,183,897 Deltona – $1,964,066 Escambia County – $1,210,487 Fort Lauderdale – $2,145,921 Fort Myers – $1,539,941 Hernando County – $1,953,975 Hialeah – $2,198,194 Hillsborough County – $8,083,062 Hollywood – $2,433,001 Indian River County – $1,500,428 Jacksonville-Duval County – $7,102,937 Kissimmee – $1,042,299 Lake County – $3,199,585 Lakeland – $1,303,139 Lauderhill – $1,500,609 Lee County – $6,639,174 Manatee County – $3,321,893 Margate – $1,148,877 Marion County – $4,589,714 Martin County – $1,563,770 Melbourne – $1,257,986 Miami – $4,558,939 Miami Beach – $1,475,088 Miami Gardens City – $1,940,337 Miami-Dade County – $20,036,303 Miramar – $2,321,827 North Miami – $1,173,374 Orange County – $11,551,158 Orlando – $3,095,137 Osceola County – $3,239,646 Palm Bay – $1,764,032 Palm Beach County – $11,264,172 Palm Coast City – $1,375,071 Pasco County – $5,185,778 Pembroke Pines – $2,330,542 Pinellas County – $4,697,519 Plantation – $1,216,427 Polk County – $5,443,116 Pompano Beach – $1,500,572 Port St. Lucie – $3,515,509 Sanford – $1,037,697 Sarasota – $1,037,697 Sarasota County – $3,949,541 Seminole County – $3,995,178 St. Petersburg – $3,709,133 St. Lucie County – $1,947,657 Sunrise – $1,775,162 Tamarac – $1,427,857 Tampa – $4,691,857 Titusville – $1,005,731 Volusia County – $3,670,516 West Palm Beach – $2,147,327 Florida total: $208,437,144
FHA short refinance option now available
In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development (HUD) now provides a new refinancing option for underwater borrowers. Originally announced in March, the enhancement of a Federal Housing Administration (FHA) refinance program offers non-FHA borrowers the opportunity to qualify for a new FHA-insured mortgage. To qualify, the homeowner must be current on his existing mortgage and lien holders must agree to write off at least 10 percent of the unpaid principal balance. The FHA Short Refinance option is targeted to people who owe more on their mortgage than their home is worth because the local market saw large declines in home values. The Obama Administration hopes the change, as well as other programs that have been put in place, will help up to 4 million struggling homeowners through the end of 2012. Participation in FHA’s short refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must also qualify under standard FHA underwriting requirements. The property must be the homeowner’s primary residence and the borrower’s existing first lien holder must agree to write off at least 10 percent of their unpaid principal balance. In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent, and a combined loan-to-value ratio no greater than 115 percent. To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010. For more information on FHA Short Refinance option, read FHA’s mortgagee letter: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf
Reverse mortgage rules may change
The Federal Housing Administration isn’t talking publicly about it, but the agency may be getting ready to lessen the upfront costs of reverse mortgages for some borrowers. The agency also, however, may be reducing the amount seniors can borrow from their homes. In a recent conference call with industry participants, FHA officials said they were finalizing plans to offer a home-equity conversion mortgage with almost no upfront mortgage insurance premium attached, according to the National Reverse Mortgage Lenders Association. The FHA also may tinker with the traditional product in a way that increases the overall borrowing costs. “HUD is looking at options to provide a lower-priced (home-equity conversion mortgage) option,” said Lemar Wooley, a spokesman for the U.S. Department of Housing and Urban Development. “We are still working out the details. Our basic plan is to make the product more attractive, while limiting FHA’s exposure to risk.” A home-equity conversion mortgage is a federally guaranteed reverse mortgage designed to let homeowners 62 or older tap into the equity in their homes. The loans and accrued interest don’t have to be repaid until the owner sells the home, dies or fails to live there for one year, but the loans have traditionally carried significant upfront and annual expenses. According to participants on the conference call, home-equity conversion mortgages would be split into two products this fall: a “standard” loan and a “saver” loan. The saver loan would have an upfront mortgage insurance premium of 0.01 percent of a home’s value, but the amount of funds that could be borrowed, known as the principal limit, would be reduced by at least 10 percent, lowering the risk to the FHA, which guarantees the loans. Because a smaller amount could be borrowed, the saver loan could be marketed as an alternative to a home equity line of credit to seniors on fixed incomes who can’t make the monthly minimum interest payments required on such lines of credit. Under the standard loan, the upfront mortgage insurance premium charged by the FHA would remain 2 percent of the property value (or a max of 2 percent of the FHA maximum loan limit of $625,500), and the principal limit would be cut by 1 to 5 percent of a home’s value, depending on the borrower’s age. The upfront mortgage insurance premium would remain 2 percent, said industry participants briefed on the plan. For both loans, the monthly mortgage insurance premium, which is 0.5 percent of the mortgage balance for a traditional home equity conversion mortgage, would increase to 1.25 percent. “For someone who needs a chunk of money, but not a huge chunk, we believe this will significantly broaden the appeal,” said Peter Bell, president of the National Reverse Mortgage Lenders Association. “They’re very smart changes.” In the past few months, several reverse mortgage lenders decreased origination fees and closing costs, partly in a bid to increase demand for the product and partly to pass along some of the profit they’ve made as investors scooped up the loans on the secondary market. The saver product would further reduce the upfront borrowing costs. The National Council on Aging, which has advocated the development of a more flexible reverse mortgage product for some time, views the coming changes as welcome news that the industry is moving past the one-size-fits-all mentality. However, the advocacy group also sees potential pitfalls. “The more flexibility there is, the more chance there is to be talked into (something) that doesn’t make sense,” said Barbara Stucki, vice president of home-equity initiatives for the National Council on Aging. In the past year, consumer advocates have voiced concerns about the marketing techniques used to tout reverse mortgages to seniors, a potentially vulnerable class of consumers. Beginning Sept. 11, consumers interested in a home-equity conversion mortgage will have to undergo expanded counseling to better understand their options. Stucki urges seniors to take full advantage of those expanded counseling efforts. “Go talk to a counselor before you talk with a lender,” she said. “Don’t wait until you’ve talked with a lender and been talked into something. This counseling is something that can be an extraordinary teachable moment.” Copyright © 2010 Chicago Tribune
Higher closing costs may not be
A new federal rule this year requiring mortgage lenders to give borrowers reliable estimates of closing costs appears to be working – whether it’s also costing borrowers more money is uncertain. A recent survey by Bankrate.com found that, on average, origination and third-party fees on a $200,000 purchase mortgage added up to $3,741 – a 37 percent jump over last year’s average of $2,739. The fees can include appraisals, credit reports, a closing or settlement attorney and surveys. Some housing experts say costs are rising because lenders have had to hire more staff to comply with the requirements of the Jan. 1 rule. That includes auditors, inspection experts and others who make sure estimates are accurate. “Lenders have had to hire compliance people,” David Leoncavallo, president of GFEazy, a Salt Lake City provider of compliance and other data for lenders. “To go up from $2,700 to $3,700 overnight is insane. Consumers should be upset.” But others say closing costs haven’t gone up. Rather, they say, the estimates simply seem higher because they more accurately reflect actual costs that buyers pay. “Before, it wasn’t an accurate assessment of closing costs,” says Tim Dwyer, president of Entitle Direct, a direct-to-consumer title insurance service. “Now, it’s a more accurate portrayal. Actual closing costs have not increased. The estimates have gotten closer to the actual costs.” The good-faith estimates also are aimed at protecting consumers by ensuring that lenders don’t lowball the numbers, says Vicki Bott, deputy assistant director of the Department of Housing and Urban Development. “Consumers get more accurate estimates upfront,” she says. “It’s not an increase in closing costs.” One reason lenders are ensuring accurate estimates is that, in many cases, they must now make up the difference between the estimate provided and the actual total. Denis Orloff, a sales associate with Rhodes Van Note & Co. Realtors, says fees have risen because more people are needed to process the same number of loans. He estimates borrowers pay $800 to $1,500 more than two years ago to have their mortgage application processed. Bob Davis, executive vice president at the American Bankers Association, says some costs have gone up because it takes more time for lenders to comply with the estimates. He also says new estimates have to be issued if, for example, the terms of a loan change. “It’s true the new requirements are more complicated and take more time to comply with,” Davis says. “Anything that takes more time and effort adds an element of cost, but it’s not significant.” © Copyright 2010 USA TODAY
HUD awards $312M in disaster recovery grants
The U.S. Department of Housing and Urban Development (HUD) awarded nearly $312 million to 13 states to reduce the human, physical and economic toll of future disasters. The grants are provided through HUD’s Disaster Recovery Enhancement Fund (DREF) encourage states to undertake activities and long-term strategies that focus on reducing damages from future natural disasters. Florida is one of the grant states and will receive $26,616,675. “An ounce of prevention today can spare communities a world of hurt tomorrow,” says HUD Secretary Shaun Donovan. “We’re making a serious investment in our future by making certain that when disaster strikes, the impacted communities in these states can weather the storm.” According to an independent study by the National Institute of Building Sciences, every dollar spent on disaster mitigation activities saves taxpayers $4 in future disaster recovery expenses. The 13 states that received funding through the DREF invested nearly $876 million in disaster mitigation, which, according to HUD, translates into a total anticipated return on investment of more than $3.5 billion. DREF funds can be used toward projects meeting unmet disaster recovery needs, including: • Buyout payments for homeowners living in high-risk areas • Optional relocation payments to encourage residents to move to safer locations • Home improvement grants to reduce damage risks (property elevation, reinforced garage doors and windows, etc.) • Improving and enforcing building codes • Developing forward-thinking land-use plans that reduce development in high-risk areas.
New mortgage-oversight bureau will need time to settle in
The financial reform bill signed into law by President Obama may look like a giant cornucopia of helpful changes for homebuyers and loan applicants, not the least of which will be the creation of a powerful Consumer Financial Protection Bureau to ride herd on the mortgage lending industry. But how soon will anyone see hard, tangible results of the law? When will the bureau begin writing new rules and cracking down on problems and abuses in everything from home real-estate settlements to credit scores to “truth in lending” and equal credit opportunity? At the moment, it looks like it will be a while, even if the president nominates a director for the consumer protection bureau quickly and the Senate confirms her or him without partisan bloodletting or a filibuster. On the other hand, mortgage industry leaders say some of the core changes promised by the legislation are either already in effect, such as stricter underwriting and documentation practices, or should be soon. Here is a quick overview of what to expect and when: The reform law itself contains deadlines for action, but they may not be as immediate as some consumers would prefer. Treasury Secretary Tim Geithner is carrying the ball, and he has had a team at work for weeks drafting the basic structure of the new consumer bureau, which will eventually be housed inside the Federal Reserve. Under the law, Geithner has a deadline of Sept. 19 to designate a “transfer date” when key legal and regulatory authorities shift from such agencies as the Federal Trade Commission, the Department of Housing and Urban Development, and the Fed to the new consumer bureau. In effect, that will be the date the bureau, with initial funding projected at $500 million a year, springs to life with a staff and full set of teeth. By law it must be no earlier than next Jan. 17. At a White House briefing, Deputy Treasury Secretary Neal Wolin asked for understanding about the huge task ahead of creating an entirely new agency that must take over responsibility for consumer protection statutes on the books for decades. “This will take some time,” he said, “but it’s worth it.” Consumer advocates say they get Wolin’s point but still expect the White House to move the new agency into functional shape fast. Travis Plunkett, legislative director for the Consumer Federation of America, said, “Yes, they need to do this right. But the sooner they can get the doors open, the sooner the public will feel the tangible benefits.” What sort of tangible benefits might begin to flow once the bureau takes official form? One of the earliest and most widely anticipated changes in the real estate field will involve appraisals on homes. The law requires the agency to quickly come up with new interim rules on appraisal accuracy and independence designed to replace the controversial “Home Valuation Code of Conduct” rules imposed by Fannie Mae and Freddie Mac in 2009. That alone should bring relief to buyers, sellers, realty agents and builders who have complained about inept, deal-breaking appraisals fostered by the code. In a companion move, the reform law also sets standards for appraisal management companies that function as third-party vendors for many lenders, and who have been criticized for assigning valuations to inexperienced appraisers who are unfamiliar with local conditions and willing to work for low fees. Another early tangible benefit: A national hotline system that will allow aggrieved mortgage borrowers and others to lodge complaints and alert the bureau to unfair and deceptive practices. The new agency will also assume control of a key consumer protection statute known as RESPA (the Real Estate Settlement Procedures Act) that seeks to prevent under-the-table kickbacks and padded fees by lenders, title companies, realty agents and builders. RESPA governs the transaction cost disclosures that millions of borrowers receive at application the “good faith estimates” as well as the standard closing form known as the HUD-1. Among the early projects expected from the new bureau will be a rewrite and streamlining of the existing home purchase disclosures and a tie-in with a revised truth-in-lending disclosure, possibly all wrapped up in a single plain-language package. Also high on the to-do list: Rules requiring all loan officers to make good faith verifications that mortgage applicants possess the ability to repay the loans they’re seeking. This may sound pretty basic, but it was an alien concept inside some mortgage companies during the heydays of the boom. Not only did they not worry about who could afford what. There was no federal watchdog on the scene to make sure they did. Now there will be. © 2010 Chicago Daily Herald, Ken Harney, via ProQuest Information and Learning Company; All Rights Reserved. kenharney@earthlink.net
U.S. Census Bureau releases info on nation’s housing
According to the 2009 American Housing Survey by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD), median monthly housing costs were $1,000 for homeowners and $808 for renters last year – and renters devoted 31 percent of income to housing costs, versus 20 percent for homeowners. The survey, available on the Census Bureau’s website, pegs the median home price at $107,500 for existing dwellings and $240,000 for newly constructed houses last year. Of the close to 112 million occupied housing units covered by the survey, 66 percent had a primary mortgage and/or home equity loan, 32 percent were owned free and clear and 2 percent had a home equity line of credit. Of homeowners who recently relocated, 28 percent said finances were their top consideration, while 15 percent cited the new home’s room/layout and design, and 10 percent moved because of the new home’s size. The survey also showed that 64 percent of homes had at least three bedrooms and 51 percent had at least two bathrooms, rising to 80 percent and 89 percent, respectively, for new dwellings. The 2009 American Housing Survey is available at: http://www.census.gov/hhes/www/housing/ahs/ahs.html Source: RISMedia (08/20/10)
Some guarantee will survive Fannie, Freddie
According to the National Association of Realtors® (NAR), the dominant thread at this week’s federal housing conference on the future was about retaining the Federal Housing Authority (FHA) to ensure finance availability for lower- and moderate-income households, and the re-shaping of Fannie Mae and Freddie Mac into something that backstops losses after private insurers take their lumps. The Treasury and the U.S. Department of Housing and Urban Development hosted the conference. At least for the near term, most of the academics and business leaders participating seem to agree: Some form of government backstopping of the mortgage market is necessary, but it won’t be under the terms that we’ve grown familiar with. Rather, the guarantee would be absolutely explicit, not implicit like we saw with Fannie and Freddie; and, in the view of some, it would take the form of a limited, maybe even catastrophic-type, backstopping in which the private sector takes first-risk position. Fannie and Freddie – government-backed secondary market companies – would adjust underwriting and terms to provide counter-cyclical restraints (i.e., tighter lending standards as appreciation rises too far from historical norms) and ensure without question that they would have the reserves to meet their commitments to investors should loans go bad. In a pure mortgage market, costs could rise far too high for most borrowers to afford financing; but with the government’s support, costs would be brought down to a level appropriate for the great middle of the market. FHA would be retained to play its role making safe, affordable financing available to lower- and moderate-income borrowers. Should the secondary mortgage market companies be pure government entities like FHA or pure private companies? The conference did not produce a clear answer on that question. However, Treasury Secretary Timothy Geithner said in his opening remarks that the days of private gains subsidized by public losses – the previous Fannie and Freddie models – are over. Perhaps, as Alex Pollack of the American Enterprise Institute said, the GSEs should be divided into three entities: purely private companies for packaging mortgage-backed securities for Wall Street investors, pure government agencies for meeting public policy goals of homeownership, and third entities for liquidating the existing GSEs’ bad debt. All agree that a lack of transparency was one of the great culprits of the mortgage crisis. Borrowers didn’t know what they were borrowing, investors didn’t know what they were investing in, and no one knew whether the federal government would actually step in should a crisis occur. To correct these shortcomings, transparency would have to be a hallmark of any reform. “We need transparency, standardization and disclosure,” said Susan Wachter of the University of Pennsylvania’s Wharton School. Source: National Association of Realtors
Habitat for Humanity rehabbing foreclosed homes
Long known for building homes from scratch for the needy, Habitat for Humanity has begun doing rehab work on the nation’s growing inventory of foreclosed houses. With funding from the federal government, Habitat and other local not-for-profit contractors are buying up and remodeling foreclosed properties in Broward and Palm Beach counties. A partnership with the cities of Sunrise, Hallandale and North Lauderdale has allowed Habitat to acquire and rehabilitate 22 foreclosed homes, said Jason Crush, executive director of Habitat of Humanity of Broward County. Funding comes largely from the Neighborhood Stabilization Program, which is underwritten by the Department of Housing and Urban Development and aims to help areas hurt by foreclosed and abandoned properties. Sunrise Mayor Roger Wishner noticed many homes in Sunrise that are neglected. “It’s a great concern, that really hurts a neighborhood,” he said. Wishner said that allowing Habitat to use some of the money from the stabilization grant has enabled the city to save 20 to 25 percent in administration costs – money, he said, that can go to rehabilitating homes. Habitat, founded in 1976, uses volunteer labor and “sweat equity” from owners to reduce construction or rehab costs. Crush said that after the houses are remodeled, families waiting for placement within the program will be able to move in. Deidre Johnson, 38, of Lauderhill, is a single mother of a 14-year-old son and is living with her brother. She is currently working off the sweat equity of her home, a phase where the future homeowner accumulates credit by volunteering 200 to 500 hours on Habitat projects. “Words cannot express it ... I am blessed,” Johnson said referring to the chance of owning a home. “I just want to call a home ‘my home.’” She has been involved with the program since March and could be placed in one of the rehabbed homes after her requirements are met. Habitat Broward pays an average of $75,000 for a foreclosed property, Crush said, and puts another $40,000 into a complete rehabilitation. Volunteers began working on the first foreclosed property, on Southwest 19th Manor in North Lauderdale, on July 31. The home’s interior will be completely remodeled, and it will have a renovated roof and back porch, said site supervisor Mark Chatlos. He expects the remodeling of the home to be finished in three months. The home, which has been vacant for two years, posed a safety risk to the local neighborhood and reduced property values for other houses on the block, said Christi Rice, spokeswoman for Habitat Broward. “Our goal is to turn it into a safe, affordable home for one of our families, while at the same time helping to improve the entire surrounding neighborhood,” Rice said. In South Florida, nearly 50,000 properties are expected to go through foreclosure this year, part of a group of more than 1 million nationwide. Habitat for Humanity of North Palm Beach will also be remodeling foreclosed homes as part of a consortium led by the Lake Worth Community Redevelopment Agency, said Don Kula, construction manager for Habitat Palm Beach. The Lake Worth CRA leads a program of 20 nonprofit organizations with the goal of improving 130 properties in three years as stipulated by a $23.2 million stabilization grant it received earlier this year, said Mike McManaman, an administrator for the Lake Worth CRA. The goal of the grant money is to put mid-income families in homes and to put foreclosed properties back on the tax roll, he said. Kula said he expects Habitat Palm Beach will remodel 30 homes as part of the program and will begin renovations as soon as the Lake Worth CRA begins closing on the properties. He said construction will be up and running this quarter. Aside from remodeling foreclosed properties, the organization will extend its services to the property’s surrounding neighbors. Volunteers will be available to help neighbors with different types of exterior renovations such as painting the house or fixing a broken front door, Kula said. He added that at most, neighbors seeking help would have to pay the cost of the materials. Adopt-a-Family of the Palm Beaches is also working with the Lake Worth CRA. The group expects to remodel 50 homes, half being for ownership and the other half being for rental, said CEO Wendy Tippett. “This will provide a great pool for low-income folks to have safe housing,” she said. Crush said that Habitat has enough vacant land to build 35 single-family homes, but going forward it will mainly rehabilitate existing properties due to the lack of available of empty land in Broward County. “We’ve land banked enough for the next couple of years, but we are going to have to do rehabs,” said Crush. Crush added that the process for placing families has had to speed up due to the deadlines imposed by HUD through the grant. In the future, families will be placed at a normal pace in either a new home or a rehabilitated home. As the sub-prime mortgage crisis shackled commercial builders, Habitat for Humanity for the first time became one of the 10 largest contractors nationwide, joining names such as Lennar Corp. and Pulte Homes. It closed 5,294 sales in 2009, ranking it eighth in Builder magazine’s top 100 list. Crush said he thinks that future homeowners will take well to the rehabilitated properties. “ are happy to be in a situation where they can live in the same place, and they can take ownership and have pride in that ownership,” he said. Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Jorge L. Valens. Distributed by McClatchy-Tribune Information Services.
FHA launches short refi opportunity for underwater homeowners
In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development (HUD) provided new details about a refinance program it announced earlier this year that helps responsible homeowners who owe more on their mortgage than the value of their property. Starting Sept. 7, 2010, the Federal Housing Administration (FHA) will offer certain “underwater” non-FHA borrowers a new FHA-insured mortgage. To qualify, an owner must be current on his existing mortgage, and his lender must agree to write off at least 10 percent of the unpaid principal on the first mortgage. “We’re throwing a lifeline out to those families … experiencing financial hardships because property values in their community have declined,” says FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.” Other details: A homeowner’s existing loan cannot be FHA insured, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio no more than 97.75 percent. The owner must qualify for a new loan under standard FHA underwriting requirements and have a credit score equal of 500 or higher. The property must be the homeowner’s primary residence, and the new debt must bring the borrower’s combined loan-to-value ratio to no greater than 115 percent. Interested homeowners should contact their lenders to find out if they’re eligible, and to determine whether the lender will write down a portion of the unpaid principal. If a homeowner qualifies, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before Oct. 3, 2010. The FHA provided complete details in a six-page mortgagee letter that can be downloaded in PDF format. To read the letter, go to: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf
