House to Vote on Stimulus Bill Today
The Senate approved a revised version of the 170 billion dollar economic stimulus package created by Bush and Congress a few weeks back.
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- Have blemished credit acceptable to FHA, but not strong enough for prime pricing in the conventional market.
- Don’t need a mortgage larger than the FHA maximum, which varies by county. (In 2006, it ranged from $200,160 to $362,790 in the highest-cost counties.)
- Can put 3 percent of the purchase on a down payment in cash.
- Don’t want an interest-only mortgage or an option ARM.
Archive for the 'FHA Home Loans' Category (Chronologically Listed)
FHA Secure Program Helps a Whopping 266 Borrowers
According to government data released today the FHA secure program released by President George W. Bush in August has helped just 266 borrowers since it’s creation.
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Will Home Mortgage Relief Plans Work?
On August 31, the President addressed the nation about the housing market.
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Posted by Richard Barber on Sep 14 2007 under FHA Home Loans, Mortgage Lending
Bad Credit Mortgage Swoon Sparks FHA Loan Revival
Lenders hit by the collapse of the subprime market are shuffling back to an old faithful: the FHA loan, or residential mortgages insured by the Federal Housing Administration.
FHA Reform Needed to Ensure a Viable Mortgage Alternative
The Federal Housing Administration must change to reflect consumer needs and demands, and provide many borrowers with a safer alternative to riskier home loan products that are on the market today, according to the National Association of Realtors.
Posted by Jed Moss on Apr 28 2007 under FHA Home Loans
FHA Loans to Assist with Subprime Mortgage Problems?
The National Association of Realtors has called on Congress to enact legislation that will allow the Federal Housing Administration to conform to today’s bad credit mortgage environment by offering safe alternatives to risky loans.
“Because FHA has not changed with the times, a growing number of home buyers are deciding to or are being forced to use one of several types of nontraditional mortgages,” said Joanne Poole, a Realtor and home mortgage broker-owner from Maryland.
She spoke on NAR’s behalf at a hearing before the U.S. Senate Appropriations Subcommittee on Transportation, Housing, and Urban Development.
If the FHA had an effective alternative to offer home buyers, “it’s not hard to imagine a lessening of those risky products, and therefore a lowering in the rising number of mortgage delinquencies,” Poole said.
NAR spoke out in favor of many proposed changes to FHA, including eliminating the statutory 3 percent minimum cash down payment, offering down payment flexibility; allowing the FHA to offer risk-based pricing; and increasing the loan limits an FHA loan.
The FHA was established in 1934 to provide consumers with an alternative during a lending crisis. Since then, the agency has insured more than 34 million properties. However, because FHA has not evolved, its market share has been dropping, Poole said: FHA loans accounted for about 12 percent of the market in the 1990s, compared with less than 3 percent today.
Poole also noted that FHA loans have a foreclosure rate lower than many of the riskier, nontraditional mortgage products, and the program has never needed a federal bailout.
“When formed, FHA was a pioneer of mortgage products, but today it has become like a lender of last resort,” Poole said.
History of Helping the Housing Market
The universal and consistent availability of FHA loan products is the principal hallmark of the program that has made mortgage insurance available during periods of prosperity or depression, Poole said.
For example, when the housing market was in turmoil during the 1980s, FHA continued to insure loans when others left the market. FHA also devised a special loan forbearance program after the Sept. 11, 2001 attacks for those who temporarily lost their jobs, and enacted a foreclosure moratorium after Hurricanes Katrina and Rita for borrowers who were unable to pay their mortgages on time.
“FHA has helped to stabilize housing markets when private mortgage insurance has been nonexistent or regional economies have faltered,” Poole said. “Now, more than ever, FHA needs to be strengthened to continue to be useful and available to borrowers. FHA is a leader in preventing foreclosures.”
SOURCE: Realtor Magazine
Posted by Jed Moss on Mar 16 2007 under FHA Home Loans
U.S. House Lifts Reverse Mortgage Cap For FHA Loans
The U.S. House of Representatives voted Tuesday to waive the existing cap on the number of reverse mortgages a federal housing agency may insure for older Americans who want to turn home equity into cash.
The Federal Housing Administration (FHA), which insures many such mortgages, is in danger of hitting the 275,000 ceiling on the number of such FHA loan transactions that it can handle.
Tuesday’s legislation, if passed by the U.S. Senate, would remove the limit and allow the federal agency to continue underwriting reverse mortgages.
Under the terms of reverse mortgages, a homeowner borrows against his or her own equity and receives regular monthly payments from a mortgage lender, but retains title to the home.
The reverse mortgage is a popular tool for elderly Americans to utilize their home equity late in life. Tuesday’s legislation passed the House unanimously and now goes to the Senate.
Rep. Jim Matheson, Democrat of Utah, sponsored the bill.
“This program was created to serve out seniors who may be ‘cash poor’ but equity rich,’” Matheson said in a statement. “The majority of the mortgage loan recipients are elderly widows, who may use the money on health care, medicine, home repairs, or other needs.”
Matheson, who sponsored legislation raising the reverse mortgage limit in a past year, said that he and other lawmakers expect to permanently remove the cap in new legislation soon.
Posted by Richard Barber on Jan 19 2007 under FHA Home Loans, Reverse Mortgages
Some Democrats Pushing For Mortgage Assistance Bill
After nearly a decade of trying, Democrats will again push for legislation this year establishing an assistance program to help families on the verge of foreclosure make their mortgage payments for up to three years.
The program, which according to Inman News, would apply only to government-insured mortgages such as VA-backed loans and FHA home loans, would allow borrowers to keep their homes by making monthly payments not to exceed 35 percent of their incomes.
The government would cover any additional amount owed to lenders for up to three years, at which time those receiving assistance would be expected to resume making full mortgage payments.
Beneficiaries would be required to repay the program for the assistance they received, plus interest.
Attempts to establish the program under the authority of the Department of Housing and Urban Development date back to 1998, when Rep. Luis Gutierrez, an Illinois Democrat representing parts of Chicago in Congress, introduced the Homeowners’ Emergency Mortgage Assistance Act, or HEMA.
The bill had no co-sponsors and was promptly referred to the Subcommittee on Housing and Community Opportunity and never heard from again.
When Gutierrez reintroduced the FHA mortgage-friendly bill again the following year as HR 595, it gained the support of 56 co-sponsors, including Democrats Nancy Pelosi of California and Barney Frank of Massachusetts.
Pelosi is now Speaker of the House, and Frank is chairman of the House Committee on Financial Services. But in 1999, with Republicans in control of Congress, the HEMA bill was once again referred to the Subcommittee on Housing and Community Opportunity, where it died.
It would be four years before Pennsylvania Democrat Chaka Fattah brought it back - or at least a nearly identical version of the mortgage rescue bill, HR 1357. That incarnation of HEMA, introduced in 2003, languished in the same committee as its predecessors.
Fattah said he plans to reintroduce yet another HEMA bill as soon as this week, and his staff is hopeful that this piece of legislation - vital to those seeking an FHA home loan - will finally have the support of leading Democrats, including Pelosi and Frank.
Fattah’s communications director, Debra Anderson, said bill 378 received limited support because Democrats had other issues that were higher priorities - not because those who had supported the bill in the past had changed their stance.
“I would suppose those same people (who co-sponsored previous versions of the bill) will sign on,” Anderson said - including Pelosi and Frank.
Fattah’s legislative director, Nuku Ofori, said there has not been a recent estimate of what such a bill pertaining to these home mortgage loans would cost, which would require funding through a separate appropriations bill. Ofori said that based on a previous estimate, the cost could be $50 million or more.
A spokesman for Gutierrez, the sponsor of the original HEMA legislation, said the Congressman is “definitely supportive” of Fattah’s effort.
Posted by Richard Barber on Jan 16 2007 under Consumer Protection, FHA Home Loans
FHA Home Loans: What’s the Advantage?
What type of borrower finds it advantageous to take out an FHA home loan?
With subprime, bad credit mortgages forcing many borrowers into foreclosure, more and more are considering FHA products. But what do these entail?
For the most part, according to Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, FHA home loan borrowers:
Credit Requirements: At risk of oversimplifying, credit standards in the conventional market range from A+ to D-, and within that range, FHA would be about B- or C+.
FHA credit requirements overlap the higher levels of subprime requirements. A good illustration is the underwriting rules applicable to a prior foreclosure. With exceptions, FHA won’t accept a loan applicant who has had a foreclosure within the prior three years.
Subprime mortgage lenders may have a three-year rule for their best credit grade, but the period scales down by degrees and might be only one year for the lowest grade.
Similarly, the maximum ratio of total debt service to income acceptable to FHA home loan borrowers is 41 percent, which is generally high relative to prime standards, but well below what passes in the nonprime sector.
A borrower who meets FHA credit standards will usually do better with an FHA loan than with a subprime loan, despite having to pay a mortgage insurance premium. The rate will be lower, the borrower will have access to a large menu of mortgages, and there are no prepayment penalties.
Most mortgages in the subprime market are 2-year adjustables with large margins, which means a high probability of a rate increase after two years, and they have prepayment penalties, usually for three years.
Home Loan Limits: The loan limits on FHAs are a major deterrent. HUD has asked Congress to allow the same loan amounts on FHAs as on loans purchased by Freddie Mac and Fannie Mae. In 2006, this would have meant an increase to $417,000 uniform across the country.
Down Payment Requirements: In 2000, FHA’s 3 percent down payment compared with 5 percent on most conventional loan programs. In 2006, however, zero-down home loans were widely available in the conventional sector, while the FHA minimum of 3 percent remained unchanged. Since zero-down loans have long been available under the VA program, FHA is now the only sector that does not have them.
This disadvantage of FHA is partially offset by down-payment-assistance programs available to FHA borrowers. One form of such assistance is second mortgages at preferential rates, which is the preferred method of public agencies at the city, county or state levels. These agencies have their own eligibility rules independent of FHA.
A second form of assistance is cash contributions from nonprofit corporations. These have no repayment obligation, but the funds provided come from home sellers who take account of the contribution in setting their sales prices.
Neither type of assistance is a good substitute for a zero-down program, a bill for which was introduced in Congress in 2004. So far, however, it has not been passed.
Posted by Jed Moss on Jan 11 2007 under FHA Home Loans
FHA Home Loan Lending Future Called into Question
The Federal Housing Authority’s lending program, once considered the premier avenue for financing a home, is facing an uncertain future.
Ben Johnson, director of the Single Family Ownership Center with the U.S. Department of Housing and Urban Development, said FHA loans now account for less than 5 percent of home loans written each year.
“Quite frankly, we’re at a crossroads to keep FHA a viable player,” Johnson told members of the Colorado Association of Mortgage Brokers Tuesday.
Last year, the House of Representatives passed legislation that would streamline the procedures for obtaining FHA loans and loosen restrictions on qualified lenders. The Senate, however, failed to deliberate the FHA Modernization Act of 2006 before it adjourned last year.
“We’re looking to reintroduce that bill,” Johnson said.
Though FHA loans are 100 percent insured and often provide the best interest rates, especially for first-time home buyers, many lenders stopped writing FHA loans in the late 1980s and early 1990s, Johnson said. The reasoning?
“The competition was coming up with more creative products.”
But Jason Berman, outgoing president of the Colorado Association of Mortgage Brokers, said lenders have been discouraged from offering FHA loans by requiring lengthy documentation and expensive financial audits.
FHA audits, said Berman, can cost lenders up to $45,000 a year.
“Many originators can’t do it. They’re mom-and-pop businesses,” Berman said.
Government regulations also require an FHA home loan lender to operate from a formal place a business, which also is dampening enthusiasm for writing FHA loans.
“The trend in the mortgage industry is for brokers to work out of their home,” Berman said.
Johnson said many criticisms of the FHA program would be laid to rest if Congress would pass legislation that would allow increased electronic processing, quicker turnaround of appraisals, revised mortgage refinancing guidelines and the elimination of closing cost restrictions and some documentation.
Home buyers would also be able to get 95 percent loan-to-value financing. The current maximum is 85 percent.
Johnson urged lenders to take a more active role in reforming the FHA loan program and saving it.
“The FHA has helped 34 million Americans become homeowners at no expense to the taxpayer,” Johnson said. “[It's] self-insured and self-funded. It makes good economic sense.”
Posted by Jed Moss on Jan 10 2007 under FHA Home Loans, Mortgage Lending