HUD Mortgagee Letter addresses revised downpayment, maximum mortgage requirements.MortgagePress.comHUD, Mortgagee Letter 2008-23, downpayment assistance, Housing and Economic Recovery Act of 2008
On Sept. 5, U.S. Department of Housing and Urban Development
Assistant Secretary Brian Montgomery issued Mortgagee Letter
2008-23, a letter that discusses revised downpayment and maximum
mortgage requirements for single family mortgages backed by the
Federal Housing Administration. Under the new requirements, which
were enacted into law as part of the Housing and Economic Recovery
Act of 2008 (HERA), a mortgagor must pay a minimum 3.5 percent
downpayment in connection with an FHA loan beginning Jan. 1,
2009.
According to the mortgagee letter, this minimum downpayment
cannot include closing costs and is inapplicable to refinances.
HERA also eliminates variable loan-to-value limits, which were
based on a combination of property value and the average closing
costs of the state where the property is located. Instead, the
mortgagee letter states that the maximum mortgage must be
calculated by applying 96.5% to the lesser of either the
appraiser's estimate or the adjusted sales price. Financing
concessions up to six percent of the sales price may still be
provided by sellers, while amounts in excess of six percent and
other inducements to purchase must be subtracted from the lesser of
either the appraiser's estimate or the adjusted sales price when
calculating the maximum mortgage amount. Finally, the letter notes
that HERA limits the maximum amount of a mortgage to 100 percent of
the appraised value, a value which includes the upfront mortgage
insurance premium.
For a copy of Mortgagee Letter 2008-23, click
here.
