April 16, 2008

FHA Secure New & Improved!

Filed under: FHASecure

Previous FHASecure Press Release

WASHINGTON – The Bush Administration today announced additional mortgage assistance for subprime borrowers who are at risk of foreclosure. The plan, which is designed to help address the adverse economic conditions affecting many communities across America, will help break the cycle of house price depreciation that is being caused by an increasing number of foreclosures and the overall contraction in the credit market. Under the new plan, HUD’s Federal Housing Administration (FHA) would have the added flexibility to insure more mortgages, including those for borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lender.

This FHASecure expansion will help more homeowners who are struggling to keep up with mortgage payments on their high-cost subprime loans. With this expansion of FHASecure, the Administration expects about 500,000 families to refinance into prime-rate FHA-insured mortgages in total by the end of this year.

“Our plan will help hundreds of thousands of desperate families who have no place else to turn for safer, lower cost ways to keep their homes,” said Federal Housing Commissioner-Assistant Secretary for Housing Brian D. Montgomery at a hearing of the House Financial Services Committee. “We want to be able to help families who are in the right house, but the wrong mortgage.”

In August 2007, FHA modified its refinancing program to help creditworthy homeowners who missed payments after their teaser rates reset. Now, FHASecure is expanding its eligibility standards. Homeowners who believe they meet this additional eligibility criteria must fall into one of the following categories:

  1. Borrowers with adjustable rate mortgages who were late on two consecutive monthly mortgage payments or at two different times over the previous twelve months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance, the same LTV as FHA’s current standard.
  2. Borrowers with adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90 percent LTV ratio for these borrowers to refinance.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers’ circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to “fill the gap” between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.

FHA will insure new, more affordable mortgages in exchange for this equity cushion, which will protect FHA’s insurance fund, and thus the taxpayer, against risk. Currently, FHA’s insurance fund is self-sustaining, meaning that it requires no appropriation of taxpayer dollars because homeowners pay for the product themselves. Further, any new FHASecure loans will continue to meet FHA’s no-nonsense underwriting standards. Lenders will be required to ensure borrowers have the capacity to repay their mortgages; show a reasonable credit history; employment history; and fully document and verify their incomes.

Like all FHA-insured loans, borrowers will be required to pay upfront and annual premiums on their loans, which directly contribute to the soundness of FHA’s insurance fund and protect taxpayers. FHA will also be simultaneously updating the pricing policy for these premiums. The new policy will base premiums on the individual borrower’s credit risk profile. More than 90 percent of FHA-backed loans are 30-year fixed rate mortgages. Homeowners currently using FHASecure are saving $400 a month on average compared to their previous subprime loans.

“More homeowners continue to turn to FHA to find mortgage terms they can afford. We’re keeping families in their homes while doing what’s in the best interest of future generations who will rely on the safety and soundness of FHA to put a roof over their heads. The modifications to the existing FHASecure product offer a prudent, yet appropriate, way to help more families refinance without putting the government or taxpayers at risk. Consistent with FHA’s historical mission, the changes are designed to help FHA provide additional liquidity and stabilize local real estate markets.”

December 3, 2007

Paulson Loan Modification Plan

Washington, DC–Thank you, John. The Office of Thrift Supervision plays an important role in our financial system, and I appreciate your leadership at this agency. Thanks, also, for hosting this second national housing forum and providing a timely opportunity for me to give an update on the U.S. economy and mortgage markets. I mention timeliness because housing issues are affecting citizens all across the country, and because Congress returns to Washington today. In the final days of this congressional session, there is much that Congress can do to help America’s homeowners. (more…)

September 19, 2007

FHASecure to the Rescue

I’m currently facing foreclosure!

I refinanced about 18 months ago. While originally I was just trying to get out of my expired ARM, my broker convinced me to take money out to pay down some debt, and do some home improvements.

Surprisingly the lenders appraiser came back with a value that was some 50% percent higher than my previous appraisal from 2 years ago.

So I took 85% LTV loan at a high interest rate because of my poor credit. I knew my monthly note would be a struggle, but me and my broker figured after paying down some debt, and make some much needed renovations to the house, that after a year I would be able to refi  into a lower interest rate and my homes value would increase as well. 

So I followed through paid off some debt did some major improvements to the house, and managed to pay my note on time by the skin of my teeth for a year. Running to a new broker to refi, (since my last broker’s office was out of business) I got qualified for a low interest 30 year FHA loan.

Everything was fine until my appraisal came back some 55% lower than my previous appraisal.

I was shocked and talked with one of the guys in underwriting as well as the appraiser; I even went as far as to send them a copy of my previous appraisal. The end result was they showed me where my current lenders appraiser used bad comps, and also used the wrong school district to get an inflated appraisal.

What are my options?

G-DUB (more…)

August 31, 2007

FHASecure

Filed under: FHASecure

WASHINGTON – President George W. Bush today announced that HUD’s Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.
 
In addition, FHA will implement risk-based premiums that match the borrower’s credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.

“Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled,” said HUD Secretary Alphonso Jackson. “FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes.”

The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today’s cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.

FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions has tripled since the start of 2006. FHA’s transactions are projected to surpass 100,000 loans by the end of the fiscal year. To date, these figures do not include refinances for delinquent borrowers.

The FHASecure initiative will operate under the same safe guidelines as the FHA’s existing mortgage insurance program without affecting FHA’s financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA’s insurance fund at no cost to the taxpayer.

The risk-based insurance premium structure will further expand FHA’s reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA’s overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.

FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

  1. A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset;
  2. Interest rates must have or will reset between June 2005 and December 2009;
  3. Three percent cash or equity in the home;
  4. A sustained history of employment; and
  5. Sufficient income to make the mortgage payment.

“FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates,” said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. “These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer.” (more…)

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