Bush administration to help 250,000 homeowners refinanceMortgagePress.comFHA refinance loans
President George W. Bush has announced that the U.S. Department
of Housing and Urban Development's (HUD's) Federal Housing
Administration (FHA) will help an estimated 240,000 families avoid
foreclosure by enhancing its refinancing program. Under the new
FHASecure plan, the 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.
"The president outlined a bold initiative ... that will be a
lifeline for families in need," said NAMB President George
Hanzimanolis, CRMS. "His promise to expand access to FHA-insured
loans and work with the lending community to help distressed
borrowers couldn't come at a better time. We encourage homeowners
who are having trouble making mortgage payments to seek the advice
of a professional and learn more about the new initiatives
announced."
In addition, the FHA will implement risk-based premiums that
match borrowers' credit profiles with the insurance premiums they
pay (i.e., riskier borrowers pay more). This commonsense,
risk-based pricing structure will begin on Jan. 1, 2008.
"Many hardworking 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
aid the FHA in bringing stability to the real estate market by
helping break the current cycle of foreclosures and price
depreciation and creating much-needed liquidity in the
now-constricted mortgage market.
"This initiative will have the dual effect of helping stabilize
the housing market and the credit markets," said Hanzimanolis. "It
is now up to Congress to continue the progress that has been made
and pass legislation that will modernize FHA and make it a truly
viable home-financing option for low- and moderate-income
families."
The FHA has recently experienced a substantial increase in the
number of conventional borrowers refinancing into FHA products. 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 the FHA's financial health. Eligible homeowners will be
required to meet strict underwriting guidelines and pay a mortgage
insurance premium, which will offset the risk to the FHA's
insurance fund at no cost to the taxpayer.
The risk-based insurance premium structure will further expand
the 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 the FHA will remain on solid financial footing as a
self-financed agency for the long term.
"It is essential that the FHA have the tools and flexibility to
adjust its products and programs to meet the evolving needs of
borrowers," said Mortgage Bankers Association Chairman John M.
Robbins, CMB. "In addition to its vital function helping low- and
moderate-income Americans buy their homes, FHA can play a crucial
role in helping stranded borrowers keep their homes."
FHASecure, like all FHA products, will be underwritten to ensure
the borrowers have the ability to repay the loans, require escrow
for taxes and insurance and 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 borrowers'
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 and 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."
FHASecure will also bring much-needed liquidity to the mortgage
market. The 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.
For more information, visit www.hud.gov.
