FHA Mortgage Guide

While the FHASecure program was able to help fewer than 4,000 delinquent conventional borrowers during the past year, the new Hope for Homeowners Program may do better.

That, at least, is the conclusion from a survey done in late September by the Consumer Credit Counseling Service (CCCS) of Greater Atlanta.

Of 591 people surveyed in late September, 381 of them, or 64.6 percent, said they met five key eligibility criteria for the mortgage refinancing program.

The Hope for Homeowners program, was established as part of the FHA Reform bill. CCCS says “mortgage lenders participating in the program can allow ‘at risk’ borrowers to refinance their current mortgage into a new fixed-rate loan insured by the FHA. Lenders’ participation in the program is voluntary.”

The “voluntary” part, of course, is a huge barrier since it requires lenders to take a loss on every loan refinanced under the program.

“Our survey results indicate this new FHA program holds the potential to help a large number of Americans struggling to pay their mortgage,” said Suzanne Boas, president of CCCS of Greater Atlanta. “Not everyone will be able to meet the terms. But if someone meets the basic criteria laid out in the housing bill, it would be worth a phone call to their lender to ask about the FHA program.”

To be counted among the 64.6 percent of survey takers who appear to meet the threshold criteria, CCCS says people needed to indicate that they live in the home with the problem mortgage; their mortgage was originated before January 2008; they didn’t have an existing home equity line or other second mortgage; they did not own another home and they spend at least 31 percent of their gross monthly income on mortgage debt.

More from CCCS:

From those surveyed, the top challenge to participation in the FHA program is paying off a home equity loan or second mortgage. Thirty-five percent of respondents reported that their home secures more than one loan.

A second mortgage or home equity loan must be paid before a homeowner can qualify for the refinance program. It is possible to pay off the second mortgage through proceeds from the new FHA loan. That could be difficult if the first and second mortgage are held by different lenders because only the primary loan qualifies for the FHA program.

Also, nearly 20 percent of respondents say they don’t spend at least 31 percent of their gross monthly income on their mortgage — a threshold required by the FHA refinance program.

Borrowers who qualify for the FHA program are responsible for paying loan origination fees, as well as an insurance premium to FHA equal to 1.5 percent of the principal annually.

There are several other conditions:

___The borrower must certify there was no misrepresentation in their application for the existing loan.

___The borrower must agree to share both initial equity and future appreciation with The U.S. Housing and Urban Development Department (HUD).

___The equity sharing agreement provides that if the house is sold within the first year, 100 percent of the initial equity (generally 10 percent of the value of the property at origination) will go to FHA. After 1 year, FHA is entitled to 90 percent of the initial equity. The percentage keeps dropping in 10 percent increments to 50 percent after the fifth year, where it stays.

___In addition to the initial equity which is a fixed amount, 50 percent of any future appreciation of the property must be paid to HUD when the property is sold.

___The FHA loan will be a 30-year fixed rate mortgage and may not exceed 90 percent of the current appraised value of the property. An additional 3 percent mortgage insurance premium will be financed in the mortgage making the initial loan to value 87 percent.

CCCS of Greater Atlanta serves clients in all 50 states and has 18 offices in four states. It is the headquarters for the CredAbility Network, a family of agencies serving consumers in north Georgia, south Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.

For additional information go to: http://www.cccsinc.org

For additional information in Spanish, go to: http://www.cccsenespanol.org

Check out these FHA resources for more information

This entry was posted on Thursday, October 16th, 2008 at 2:44 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.