If you were listening to the housing news last week, you probably heard a number of reports about lending changes that were announced by the Federal Housing Administration (FHA).  While many f the news reports were confusing, the truth is pretty clear, and isn’t as bad as some people may have heard.

Overall the measures are intended to help the FHA better manage its risks and strengthen its capital reserves, while still providing home loans to the nation.  The good news, as FHA Commissioner David Stevens stated recently, is that “by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery” and “remain the largest source of home purchase financing for underserved communities.”

What’s Changing?

If you or someone you know is considering an FHA loan, some of these changes may affect you.   Here’s a clear, concise rundown of the major changes and what they mean:

1.  Increased mortgage insurance.  The mortgage insurance premium (refered to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%.  This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage incsurance is paid over the lfe of the loan, rather than upfront at closing.

2. new down paument and credit score requirements.  According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at leat 10%.  This change is designed to help the FHA balance its risk while still providing affordable downpayments for consumers with a history of good credit and responsibility.

3.  Reduced seller concession.  Basicly, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous law.

In addition to these changes, the new policies  contain a series of new measures aimed at increasing lender enforcement.

These changes will become effective on April 5, 2010.  The bottom line is that the changes will impact some homebuyers more than others.  But in the end, the FHA is still committed to providing affordable home loans.

If you’re concerned about your credit score or are worried about what these changes may mean to your specific situation, please call or email to schedule an appointment.  There are many different programs available for homebuyers, so finding the right plan for you just requires a short discussion about your goals and financial picture.

Courtesy of Kristy Bryant, Bank of Missouri

Despite the claims of FHA Commissioner David Stevens, major changes to FHA guidelines will most certainly have a significant impact on the housing market.

OBAMA ADMINISTRATION KICKS OFF MORTGAGE MODIFICATION CONVERSION DRIVE

The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications.

The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward.

Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the new Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

In her new role, Caldwell will lead HPO’s conversion drive efforts. “Encouraging borrowers to move through the process of converting trial modifications to permanent modifications remains a top priority for HUD,” said HUD Assistant Secretary for Housing and FHA Commissioner David Stevens. “As a part of our continuing efforts to improve the execution of the HAMP program, HUD is committed to working with servicers, borrowers, housing counselors and others dedicated to homeownership preservation to improve the transition of distressed homeowners into affordable and sustainable mortgages.”

With tens of thousands of trial modifications being made each week, the Administration is now working to ensure that eligible borrowers have the information and the assistance needed to move from the trial to the permanent modification phase. (All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them.)

As the first round of modifications convert from the trial to permanent phase, the Administration has identified several strategies for addressing the challenges that borrowers confront in receiving permanent modifications.

In addition to the conversion drive that kicks off today, the Obama Administration has already taken several steps to make the transition from trial to permanent modification easier and more transparent by:

* Extending the period for trial modifications started on or before September 1st to give homeowners more time to submit required information;

*Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;

* Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly;

* Enhancing borrower resources on the MakingHomeAffordable.gov website and the Homeowner’s HOPE Hotline (888-995-HOPE) to provide direct access to tools and housing counselors.

Find out more about The Mortgage Modification Conversion Drive.

Source: MakingHomeAffordable.gov


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