New FHA Mortgage Assistance Program
President Bush announced that HUD's Federal Housing Administration (FHA) will help homeowners avoid foreclosure by
enhancing its refinancing program effective 9/1/07.
Under the new FHASecure plan, FHA will allow homeowners with strong credit histories who had been making timely
mortgage payments before their loans resent, 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. This common sense risk based pricing structure will begin on 1/1/08.
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 according to HUD Secretary Alphonso Jackson.
The combination of FHASecure and risk based premium pricing will permit FHA to return to the role it was originally
designed to play, brining stability to the real estate market by helping break today's cycle of foreclosures and
price depreciation and creating much needed liquidy 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 2007 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 home owners 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 additonal underserved homeowners, particularly
minorities and first time home buyers 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 5 criteria:
1. A history of on time mortgage payments before the borrowers teaser rates expire and loans reset.
2. Interest rates must have or will reset between June 2005 and Dec. 2009.
3. Three percent cash or equity in the home.
4. A sustained history of employment.
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, says
FHA Commissioners. 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.
FHASecure will also bring much needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA insured
loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith
and credit of the U.S. Government. This guarantee makes Ginnie Mae's mortgage backed securities the safest on the market and
helps to channel greater capital into the housing market, benefiting U.S. homeowners.
For more information about the New FHASecure program, please visit:
www.hud.gov
Or use our "Visitor Info Request Form".
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