Today President Bush announced that HUD’s Federal Housing Administration (FHA) will help nearly ¼ million homeowners avoid foreclosure. The new plan called FHASecure will start immediately. The plan will allow borrowers with strong credit histories, who had been making timely mortgage payments before their payments increased, but are now in default, to qualify for refinancing.
FHA will also implement risk-based insurance premiums that match the borrower’s credit profile with the insurance premium they pay. In other words, riskier borrowers will pay more in premiums. This risk-based pricing structure will start on January 1, 2008. The combination of the FHASecure plan and the risk-based insurance premium will help bring stability to the housing market. It will also allow those who were in good financial standing before their payments rose to keep their homes.
With the changing market, FHA has seen an increase in the number of conventional borrowers refinancing into FHA products. The FHASecure program will help even more borrowers. The number of FHA transactions has tripled since 2006 and are projected to surpass 100,000 loans by the end of the current fiscal year.
FHASecure loans will be underwritten similar to the other FHA products. Each loan will be underwritten to ensure the borrower is able to repay the debt. The loan will require an escrow account for taxes and insurance and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
The FHASecure program should bring liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.
For more information about FHASecure and other FHA products, please call 1-800-CALL-FHA or visit www.fha.gov or www.hud.gov. For a list of your local homeownership center or a HUD-approved housing counseling center, go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
-excerpts taken from HUD website.