FHA Mortgage Guide

HUD is going to send out 675,000 letters touting the joys of FHA mortgages to borrowers with toxic loans.

It’s not a bad idea, but plainly the purpose is to capture new borrowers with good credit rather than borrowers who are already delinquent.

HUD sent out 280,000 letters in February and its direct marketing efforts will now continue with a second and larger mailing between now and September.

HUD says that “FHA-insured loans are backed by the full faith and credit of the government, which typically allows lenders to offer mortgage products at a lower, more affordable interest rate. More than 90 percent of FHA-backed mortgages are 30-year, fixed rate products. FHA also provides a one-of-a-kind loss mitigation program that helps protect borrowers against foreclosure. Finally, FHASecure, which allows borrowers who are current and delinquent on their loans to refinance with the FHA, is saving tens of thousands of families on average $400 a month compared to their exotic subprime loans.”

It would surely benefit a lot of borrowers to switch into FHA financing. That said, the business about “current and delinquent” borrowers seems to suggest that homeowners in both categories will be treated with equal enthusiasm. That’s just not the case: Between October 1st and the end of May, HUD endorsed a total of 626,618 loans of which 2,825 have been for delinquent conventional borrowers.

HUD points out that the letters are being sent to homeowners who have already faced or are experiencing the first reset of their adjustable rate mortgages and that through the end of the year, FHA can insure home loans valued between $271,050 and $729,750.

Unfortunately, refinancing in many cases will set off massive pre-payment penalties. Many of the borrowers HUD is trying to reach should have had FHA loans in the first place. Still, HUD is on the right track with this one.

Below is a copy of the letter being sent to homeowners.

Dear Homeowner,

Do you need help with your mortgage?

Your area is experiencing a disturbing home foreclosure rate that has accelerated in recent months.

News reports cite the damaging effects of “sub prime loans” as a major factor in the unsettled market. By focusing on education and safe mortgage alternatives, though, the Federal Housing Administration (FHA) of the United States Department of Housing and Urban Development (HUD) is working diligently to address this unacceptable foreclosure trend.

Over the past few months, FHA has worked with mortgage loan servicers to identify solutions for the crisis facing current homeowners. Your current mortgage does not have to be FHA insured for you to benefit from our help. If you are facing financial difficulties due to a recent or imminent mortgage reset, or other housing-related difficulty, I urge you to contact us at 1-800-CALL-FHA or to visit www.fha.gov. There you will have the opportunity to learn about foreclosure prevention, legal rights, and credit counseling, among other topics.

Many homeowners may also be able to take advantage of our recently announced FHASecure program. This new program allows eligible homeowners to refinance into a secure, fixed-rate FHA loan even if they are in default.

Additionally, a new partnership between mortgage companies and non-profit housing counselors called HOPE NOW is available to you. Their mission is simple: reach out to homeowners who may be having difficulty paying their mortgages. For more information or to see if your mortgage company is a member of this caring coalition please go to www.hopenow.com.

Again, please contact us at 1-800-CALL-FHA (800-225-5342) or go to www.fha.gov. As part of the federal government, the Federal Housing Administration wants to help you protect and preserve the American dream — your home.

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing -
Federal Housing Commissioner

Check out these FHA resources for more information

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