FHA Program Offers Purchase, Renovation Aid

The Federal Housing Administration is encouraging use of its little-known 203(k) loan program.

The 203(k) lets an owner-occupant borrow money for both the purchase and renovation in one loan, and put down only 3.5 percent.

The program requires the use of credentialed contractors and can include cosmetic improvements as well as major renovations like replacing plumbing or electrical. Completing the application process requires patience, says Nancy Hammock, an associate with RE/MAX Properties in Western Springs, Ill.

But in this lending environment, more homebuyers are finding 203(k)s worth the hassle. In fiscal 2008, the government insured about 6,700 of the 203(k) loans. This year, more than 11,000 loans have already been insured, according to the Office of the Comptroller of the Currency.

Source: Chicago Tribune, Mary Ellen Podmolik

FHA Expands Role in Financing Homes

The Federal Housing Administration’s involvement in mortgage financing is likely to grow, HUD Secretary Shaun Donovan told a Philadelphia audience last week.

“While we prefer to have the private market be more involved, we have asked . . . to expand our authority to provide $400 billion more for the FHA insurance program,” he said.

FHA was involved in fewer than 2 percent of mortgages in 2006. Today, it has a role in 24 percent and that number is increasing, Donovan said.

Source: The Philadelphia Inquirer, Alan J. Heavens (06/18/2009)

Bill Offers Renewed HOPE for Troubled Owners

The Obama Administration on Wednesday signed a bill that attempts to inject some hope into the housing rescue program–called Hope for Homeowners.
 
The original program asked banks to reduce mortgage balances voluntarily to 90 percent of a home’s current market value. The loan would then be refinanced into an FHA mortgage.

The program didn’t work because it forced lenders to sell short with no chance of an upside, says Tom Kelly, a spokesman for JP Morgan Chase.

The new version of Hope sweetens the pot by paying lenders $1,000 for every Hope-refinanced loan and easing the amount they have to write off by allowing loans of up to 93 percent of the market value.

But the most important change is that it allows the U.S. Department of Housing and Urban Development, FHA’s parent agency, to share home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued.

This bill originally included cramdown legislation that would have allowed bankruptcy judges to modify the first mortgage, but that portion of the legislation was defeated in the Senate.

Source: CNNMoney, Les Christie (05/20/2009)

Tax Credit Can Be Used for Down Payment

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn’t receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at “The Real Estate Summit: Advancing the U.S. Economy,” at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C..

He says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Source: NAR

Is FHA Key to Housing Turnaround?

Federal Housing Administration loans can be a very good deal for home buyers, especially those who don’t have a lot of cash or whose credit rating isn’t stellar, experts say.

FHA loans now account for 20 percent of new mortgages, up from 3 percent in 2006. What’s more, the number of authorized FHA lenders has increased 500 percent in two years.

Other benefits of FHA loans include easy loan modifications for borrowers who fall behind, easy refinancing plans if rates decline, and low rates overall, which don’t rise if the borrower has a low credit score. There are no income restrictions on FHA loans, so even borrowers with good incomes may find them attractive.

FHA loans still require a pre-settlement inspection of the home, but the process isn’t nearly as arduous as it once was, says George Hanzimanolis, past president of the National Association of Mortgage Brokers.

Source: CNNMoney.com (04/01/2009)