The government’s program to refinance delinquent mortgages into affordable government-insured loans has been enhanced. Among the improvements are increased loan-to-values, extended loan terms and immediate compensation for second mortgage companies. More than ever before FHA home loans have been the backbone supporting mortgage brokers and lenders with subprime and foreclosure prevention products.
Recent increases in subprime home foreclosures have seen many turning to FHA Secured home loans. The Federal Housing Administration was created in 1934 as an effort to bolster homes sales during the Depression. By financially guaranteeing loans the FHA lifts much of the risk of non-payment and foreclosure from private lenders. It is important to remember that the FHA is not a lender; they just guarantee your loan.
Hope for Homeowners maintains FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:
* Their mortgage must have originated on or before January 1, 2008;
* Their mortgage debt-to-income must be at least 31 percent;
* They cannot afford their current loan;
* They did not intentionally miss mortgage payments; and
* They do not own second homes.
Features of FHA-insured loans under the new program include:
* 30-year, fixed rate mortgage;
* Maximum 90 percent loan-to-value ratio;
* No prepayment penalties;
* $550,440 maximum mortgage amount;
* Extinguishment of any subordinate liens; and
* New home appraisals from FHA-approved appraisers.
HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.
Funding
FHA will insure up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.
Program Timeline
The program will last from October 1, 2008 through September 30, 2011. Since September 2007, FHASecure has helped more than 290,000 families obtain safer, more affordable mortgages. FHASecure is on pace to help 500,000 families by the end of the year.
