Posts Tagged ‘Federal Housing Administration’
Obama’s Mortgage Refi Plan To Go Through FHA
It will go through the government mortgage insurer, the Federal Housing Administration and could cost between 5 and 10 billion dollars, according to senior administration officials.
Lower Loan Limits: Let the Games Begin
Today the National Association of Home Builders released a study claiming that lowering the loan limits at Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), "will reduce housing demand and place downward pressure on home prices in major housing markets."
Congress holds mortgage limits at nearly $730K
Congress has extended a policy that allows homeowners in pricey real estate markets to secure government-backed mortgages of nearly $730,000. Lawmakers have voted to keep the maximum size of loans guaranteed by Fannie Mae and Freddie Mac and the Federal Housing Administration at the current level through the end of 2011. Those limits apply in expensive areas like New York and San Francisco. Without the change, the limits would have fallen to about $625,000. The limit was $417,000 before 2008 and remains at that level in most of the country. The measure was included in a temporary spending bill that lawmakers sent to President Barack Obama early Thursday. Real estate agents, mortgage bankers and homebuilders lobbied to keep the upper limit in high-priced markets, arguing that the housing market would suffer if the limits were not extended. Critics argued that lower limits would help wean the housing market off government support. Keeping the current limit will help about 60,000 borrowers annually, estimated Mahesh Swaminathan, a mortgage analyst with Credit Suisse. Even though relatively few borrowers will be assisted, Guy Cecala, publisher of trade publication Inside Mortgage Finance, said lawmakers are focused on keeping the struggling housing industry happy. “Nobody wants to oppose or upset the Realtors and the homebuilders in an election year,” he said. Anything above the limit set by Congress falls into a category known as “jumbo” loans. They made up 5 percent of the mortgage market this year, down from a typical level of about 18 percent, according to Inside Mortgage Finance, a trade publication. During the financial crisis, mortgage lenders became far less willing to make those loans. In December 2008, borrowers who wanted a jumbo loan were paying 1.8 percentage points higher on their mortgage rates than conventional government-backed loans, according to financial publisher HSH Associates. That gap narrowed as the crisis eased. As of last week, borrowers who receive jumbo loans were paying a premium of 0.8 percentage points, according to HSH. That’s still above a pre-crisis level of 0.25 percentage points. AP Logo Copyright © 2010 The Associated Press, Alan Zibel
Higher conforming loan limits due to expire
Unless Congress intervenes, the maximum loan amount the Federal Housing Administration will back, as well as loans backed by Fannie Mae and Freddie Mac, will return to $417,000 in most areas and $625,500 in high-cost areas. The higher loan limits are due to expire Dec. 31, 2010. Over the last two years, the government raised the limits in some high-cost areas to $729,750. If Congress doesn’t extend higher limits, home prices would “drop precipitously” because it would be “impossible to finance homes in most parts of Los Angeles and certain other major cities,” said Rep. Brad Sherman, a California Democrat and member of the House Financial Services Committee. But many economists support the end to higher limits. “We need to think how we are going to exit from a Fannie-and-Freddie world, and this is a very small step toward that exit,” said Richard K. Green, director of the University of Southern California’s Lusk Center for Real Estate. “Dialing it back to $625,500 is a perfectly reasonable thing to do.” Source: The Wall Street Journal
FHA Loans Uncovered
The Federal Housing Administration or FHA, it is an organization that provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes as well as manufactured homes and hospitals. FHA loans help buyers to purchase a home with only small down payment, and for this reason FHA Loans are the most popular in our current economy. This kind of loan is given by qualified and approved FHA lenders to secure the financial state of a buyer. FHA Loans work when the FHA promises to pay lenders if a borrower defaults on an FHA loan. To fund this obligation, the FHA charges borrowers a fee. Home buyers who use FHA loans pay an upfront mortgage insurance premium (MIP) of 2.25%. They also pay a modest ongoing fee with each monthly payment. If a borrower defaults on an FHA loan, the FHA uses collected insurance premiums to pay off the mortgage. Wondering who can get a FHA Loan? Almost anyone. There is no limit to the income of a person who wants to apply for this loan. The limit lies with the amount that person could borrow. In general, you’re limited to relatively small mortgage loans relative to home prices in your area. Also, a person should have a reasonable debt to income ratios and 620 or higher credit score to get an FHA Loan.
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
Could we see another buyer tax credit?
Housing and Urban Development Secretary Shaun Donovan said Sunday on CNN’s “State of the Union” that the administration would “do everything we can” to stabilize the U.S. housing market. “The July numbers were worse than we expected, worse than the general market expected, and we are concerned,” Donovan said. “That’s why we are taking additional steps to move forward.” Whether HUD will resurrect the first-time homebuyer tax credit is up in the air. “All I can tell you is that we are watching very carefully,” Donovan said on the show. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.” Gov. Charlie Crist appeared on the same show and supported a new version of the homebuyer tax credit, saying it would “help enormously,” noting that Florida has the nation’s third highest foreclosure rate. Donovan also said the Federal Housing Administration will launch an emergency loan program to help unemployed borrowers stay in their homes and a program to help underwater borrowers refinance. Source: Bloomberg, Holly Rosenkrantz
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
Senate approves higher gov’t mortgage fees
Higher monthly fees are coming for consumers who take out home loans guaranteed by the Federal Housing Administration, the primary source of mortgages for first-time homebuyers. The Senate late Wednesday unanimously approved legislation giving the FHA the power to hike monthly premiums it charges to consumers. The measure now goes to President Barack Obama, who is expected to sign it. The new law would affect new loans and not ones that already have been made. Officials say the agency needs the authority to stabilize its finances, which have deteriorated because of the foreclosure crisis. The fees are projected to bring in an extra $3.6 billion per year, according to the FHA. The agency does not make loans, but offers insurance against default. People who take out FHA-backed loans pay a smaller downpayment, as low as 3.5 percent of the home price. But they are subject to two additional fees – one at the start of the loan and an annual fee. Both fees are typically spread out in monthly installments over the life of the loan. Borrowers who take out loans through FHA pay an annual fee of 0.55 percent of the total loan. FHA officials expect to raise that to 0.9 percent, though the bill would give them the power to hike it as high as 1.55 percent. Earlier this year, the FHA raised the upfront fee to 2.25 percent of the total mortgage amount from 1.75 percent. Agency officials want to lower that to 1 percent. The combined impact of lowering the upfront fee and raising the monthly fee would mean a borrower taking out a mortgage of $170,000 at an interest rate of 5 percent would pay an extra $38 a month. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer.
