[Loan Doctor]

I saw a report recently that said that less than 2000 people whose homes were going into foreclosure have been helped. There must be a lot of people that are being helped that did not get that far, as I have seen total figures of 200,000 being helped.

Mortgagee Letter 2007-11: Effective 7-14-08
Now FHA Secure includes borrowers that were late before their ARM reset occured (before you had to be on time)

Changes the amount of UpFrontMortgageInsurancePremium to 2.25% from 1.5% if you are not deliquent. Changes the montly from .5% to .55%.

This is good as it is becoming a risk based product-so hopefully won't need to have the tax payers pay for a larger amount of defaults. Theory being that if you were late before, you will probably be late again. I hope that is not the case however.

All ARMS that are being refinanced into FHA, are now under the FHA Secure program. If no deliquency then the UFMIP is still 1.5%.

Any questions?

Charles

[Loan Doctor]

HUD announcement -8-064

The FHA today issued final guidance that will permit its flagship mortgage insurance program to assist more homeowners who are struggling to keep up with their high-cost subprime adjustable rate mortgages. To ensure taxpayers do not assume the cost of this expansion, HUD's Federal Housing Administration (FHA) will implement a fair and flexible premium pricing structure beginning July 14, 2008.

Modifications to FHASecure will help homeowners who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months. As an alternative to foreclosure, eligible borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances. Implementation of FHA's new premium pricing plan on July 14 will coincide with the start date to expand FHASecure.

"With a flexible premium structure, FHA can fulfill its mission of assisting families who do not have access to prime-rate financing. Fair pricing will allow FHA to reach more troubled homeowners without placing excessive risk on its insurance fund," said HUD Deputy Secretary Roy A. Bernardi.

Currently, FHA has a 'one size fits all' premium structure that charges borrowers 1.50 percent of the loan balance upfront and .50 percent annually regardless of their credit standing. FHA feels this approach does not treat borrowers equitably and may put the FHA insurance fund at risk. Under the new rule, FHA's upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent. Borrowers must continue to adhere to FHA's strict underwriting criteria. By charging different premiums, FHA will operate like most other insurance companies. This premium structure will preserve lower premium costs for FHA's traditional borrowers, including low-income and minority families who have a strong credit history and save for a downpayment.

By charging slightly higher premiums based on risk, FHA will be able to extend the benefits of its FHASecure program to more homeowners affected by the volatility in the mortgage market. Borrowers refinancing into FHA from the subprime market are better off, even with slightly higher mortgage insurance premiums, because FHA insurance gives them access to substantially lower interest rates, and lowers their overall mortgage costs. The difference between the existing 1.50 percent upfront premium and a 2.25 percent premium for a $150,000 mortgage is only about $7 per month. With families turning to FHA in record numbers, the agency is on pace through its expansions to help approximately 500,000 families refinance into its affordable mortgage product by the end of this year.

"Charging borrowers a fair premium based on their credit risk means that they pay their own way, allows FHA to reach more borrowers, and helps create a more financially sound FHA. That's good news since FHA, like any other insurance company, supports its flagship program through its premiums - not taxpayer dollars," said Assistant Secretary for Housing - Federal Housing Commissioner Brian D. Montgomery.

FHA has the statutory authority to charge as much as 2.25 percent for the upfront premium and .55 percent for the annual premium. This premium structure will give borrowers an incentive to improve their credit and thereby pay lower premiums. Today's announcement will allow FHA to offer a range of premiums, depending on the level of risk borrowers represent based on their credit profile and the amount of their downpayment. In other words, to determine a fair premium, FHA will look at the borrower's financial responsibility and how much they are willing to invest in their home.

[Qtip]

Good info, thanks for sharing!!!

[jlynn]

Originally Posted by Loan Doctor

Modifications to FHASecure will help homeowners who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months.

Under the new rule, FHA's upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent. Borrowers must continue to adhere to FHA's strict underwriting criteria.

Isn't the upfront premium exactly what it says. The percentage of the mortgage price they pay at closing?

So, the homeowners being helped in my first quote, will actually have to pay more upfront premium to get out of their subprime loans? Aren't the ones described likely cash strapped?

[Loan Doctor]

The term Up Front Mortgage Insurance Premium is sort of confusing I think.
FHA charges two MI fees.

One is the UFMIP, this is paid to FHA when the loan closes, but the fee is added on to the loan. So, let's say the loan is for 100,000. The actual loan is for 101,500 to pay the UFMIP.
The fee today is a standard 1.5%. It will end up being between 1.25 and 2.25%. It is paid up front, but added to the loan normally.

The other MI fee is a per month fee, and is there until the loan is at least 60 months old-and 78% of the initial loan size. That fee will be either the current .05 per year and can go up to .055 with the new plan.

Charles

[jlynn]

Will the premium fee be score driven?

[Loan Doctor]

From what I have heard through the grapevine, it is going to be at least partially score driven, ie someone with a 580 score will probably be at the 2.25%/.055% program and someone with a 720 score will have the 1.25%/.05% program. The in between range will be determined by the strength of the file.

It is just something that will have to be learned after Bastille day. Funny that they picked that day to make the change.

Charles

[jlynn]

I don't understand why someone with a 720 would want to go FHA, but then its been years and years since I was in RE, and the whole mortgage industry is spinning on its tail.

[Loan Doctor]

I have to tell you that it seems like every day there is either a change or an announcement of a change.

Why would someone with a 720 go FHA?
The MI is much less, and most people don't put down 20%.
The seller's concessions for closing costs have a higher allowance, 6% vs 3%.
If the seller is motivated, they can help with a down payment assisstance.
So, 0 down, 0 closing costs. AND the nice thing is that appraisers are really being pressured to give "Real" appraisals, so if the seller says, ok, I will give up 9%, the home still has to appraise at an un-inflated sales price.

Lastly, for those in what is called a "Declining" market, ie Phoenix, Florida, Southern CA (or maybe all of CA) conventional lenders and MI insurers will only lend a max of 90%, whereas with FHA-read above.

So, people with good credit are going with FHA. This is good because their premiums, though being lowered, will still make up for the defaults that we are for sure going to see.

Charles