2. Today’s Agenda
FHA’s Mission and Goals
Benefits to an FHA loan
How FHA compares to other mortgage
programs
FHA Resources
3. FHA-Established June 28, 1934
Our Mission
Help people realize the “American Dream”
of homeownership
Stabilize and Revitalize Communities
Promote Economic Growth
Reduce Defaults/Preserve Neighborhoods
4. FHA’S Goals
Educate Consumers to make informed
choices
Enable individuals to
Own homes
Build equity in their homes
Simplify the home buying process
Removing regulatory barriers
5. FHA’S Goals (Continued)
Provide homeownership and home retention
opportunities to the underserved such as:
First time homebuyers
Minorities
The elderly
Embrace innovative financing
Down payment assistance
Silent second
6. Feel Secure With FHA:
Mortgage Insurance
FHA only insures mortgages
Similar to private mortgage insurance
Protects lenders against mortgage loss
Similar to private mortgage insurance
Encourages lender flexibility in loan approval
Additional risk covered by insurance
Protects buyers from unfair practices
7. FHA Mortgage Insurance (Cont.)
Upfront Mortgage Insurance Premium
Also known as: UFMIP
May be financed
Monthly Mortgage Insurance Premiums
Also known as: MIP
Required on all loan types
Money collected is used to pay claims
8. Mortgagee Letter 2010 – 02
January 2010
Increase Of Upfront Premiums for FHA
Mortgage
Effective for case numbers issued on or
after April 5, 2010
Purchase money and full credit
qualifying refinance
Increased to 2.25%
Streamline refinances – all types
Increased to 2.25%
No change to annual/monthly premiums
Changes again in October 2010
9. Mortgage Insurance Premiums (Cont.)
Effective October 4, 2010
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010
10. Mortgage Insurance Premiums (Cont.)
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010
11. Benefits Of FHA Loans
Ease in qualifying borrower
Alternative credit and self-employed – okay
Manual underwriting acceptable
Qualifying ratios 31%/43%
May be higher with compensating factors
or automated TOTAL Scorecard approval
12. Other Benefits
No prepayment penalty
Fully assumable mortgage
Credit qualifying required
Streamlined refinance (Mortgagee Letter 2009 – 32)
FHA loan to FHA Loan
Simplified qualifying
13. Additional Benefits
Loss mitigation/foreclosure prevention
Forbearance
Loan modification
Partial claim
FHA – Home Affordable Mortgage
Program
Short/Compromise Sale with
incentives
Deed-in-lieu of foreclosure
14. Minimum Required Investment
Minimum cash investment – down payment
3.5% of appraised value or sales price
Whichever is less
Sales price greater than appraised value
then also need to pay difference
No longer calculated on “acquisition cost”
Secretary of HUD has authority to amend
minimum required investment
Can set higher, but not lower required borrower
investment
15. Minimum Required Investment –
Cont.
May come from borrower’s own funds or
100% gift
Immediate family member/close familial tie
HUD approved non-profit organization
Acceptable secondary financing
Local city, county, and state programs
All seller-assisted down payment
assistance eliminated
16. Minimum Credit Scores and
Loan-to-Value Ratios – Continued
Maximum loan-to-value limits based on credit scores
Score of 580 or greater 97.75%
Scores between 500 to 579 90%
Scores less than 500 Not eligible
Disaster Relief Program
Score of 500 or greater 100%
Below 500 Not eligible
Borrowers in negative equity position
Refer to Mortgagee Letter 2010 – 23
17. The FHA Borrower
Must occupy the property as primary
residence
Must be a legal resident
U.S. citizen
Lawful permanent resident aliens
Non-permanent resident aliens
Must have valid Social Security Number
(T.I.N. unacceptable)
18. The FHA Borrower - Continued
Only one (1) FHA loan allowed
Some exceptions
See Mortgagee Letter 2008 – 25
May be HUD approved non-profit or
government agency
Borrower(s) can hold title in Inter-Vivos
(living) Trust
May be co-borrower or co-signer
19. The FHA Property
1 – 4 Unit dwellings
SFR, PUD, Condo (attached, detached, high
and low rise)
Manufactured Homes
Existing or New Construction
Must meet HUD Minimum Property
Requirements (M.P.R.’s)
Owner occupancy required
20. How Does FHA Compare To
The Industry ?
Competitive interest rates
Financing up to 105% CLTV (or more)
on purchases
With approved secondary financing
Maximum 100% “typically”
21. How Does FHA Compare To The
Industry ?
FHA’s 1-1, 3-1, 5-1 ARM adjustment and life caps better
1-1 and 3-1 ARM
FHA - 1% per adjustment – 5% Life
Industry - 2% or more (1-1, 3-1) – 6% Life
5-1 ARM
FHA – 1% per adjustment –5% life
Industry - 5% first adjustment – 5% Life
10 years to reach life cap on FHA 5-1 ARM
22. More Comparisons
Contributions by third party 6%
regardless of LTV/CLTV
VS. 3% over 95% LTV/CLTV
Manual underwriting allowed
All loan types
Automated underwriting not required
Maximum financing allowed for
Manufactured Homes
23. Where to Get More Information
1 – 800 – CALL – FHA (1 – 800 – 225 – 5342)
A source for all FHA questions
Industry partners and Consumers
www.hud.gov
On-line resource for info about FHA and FHA
programs
On-line source for all other HUD programs, grants,
forms, press releases, etc.
User friendly
www.fhaoutreach.gov/FHAFAQ
On-line resource to frequently asked questions
27. Agenda For Webinar
November 16, 2010
Previous changes
Housing & Econ. Recovery Act changes
1 – 4 Unit mortgage program
Condominium program
Streamline and Rehabilitation loan
Energy Efficient Mortgage (EEM)
Solar and Weatherization
28. The U.S. Department of Housing and Urban Development
would like to thank the
California Association of Mortgage Professionals
and
Oregon Association of Mortgage Professionals
and its’ members
for your interest in
FHA and FHA programs
