Company

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U.S. Department of Housing And

Urban Development

October 2010

FHA TODAY

Today’s Agenda

FHA’s Mission and Goals

Benefits to an FHA loan

How FHA compares to other mortgage programs

FHA Resources

FHA-Established June 28, 1934Our Mission

Help people realize the “American Dream” of homeownership

Stabilize and Revitalize Communities

Promote Economic Growth

Reduce Defaults/Preserve Neighborhoods

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

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

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

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

Mortgagee Letter 2010 – 02

January 2010Increase 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

Mortgage Insurance Premiums (Cont.)

Effective October 4, 2010

Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010

Mortgage Insurance Premiums (Cont.)

Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010

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

Other Benefits

No prepayment penalty

Fully assumable mortgage

Credit qualifying required

Streamlined refinance (Mortgagee Letter 2009 – 32)

FHA loan to FHA Loan

Simplified qualifying

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

Minimum Required Investment

Minimum cash investment – down payment

3.5% of appraised value or sales price

Whichever is lessSales 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

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

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

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)

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

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

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”

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

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

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

www.hud.gov

www.hud.gov

www.fhaoutreach.gov/FHAFAQ

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

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