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MBA's Courson comments on draft legislative language on federal plan to purchase mortgage assets

National Mortgage Professional
Sep 22, 2008

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.
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