FHA Loan Expert Blog

WashingtonPost.com reported on FHA Seller Funded Down Payment Assistance Programs (DPAs) yesterday.  I wonder if this HUD Rule will be challned in some way?  Time will tell.  For now, at least, it looks like here will be no more seller funded DPAs helping homebuyers to purchase.

From the WashingtonPost article we read:

The Federal Housing Administration will prohibit borrowers from using seller-financed down payment assistance programs that have helped hundreds of thousands of people buy homes but have come under the scrutiny of federal authorities.

Such programs allow home sellers to give money to charities, which in turn assist buyers with their down payments. The sellers pay the charities a service fee, but often recoup the money by charging a higher price for the homes, usually 2 or 3 percent more, or an amount equal to the down payment, according to a 2005 study by the Government Accountability Office.

In a conference call with reporters, Federal Housing Commissioner Brian Montgomery said the FHA will publish its new rule in the Federal Register on Monday. The rule, which is little changed from a preliminary version put out for comment in May, will go into effect 30 days after publication.

“These contributions often function as an incentive to purchase the home,” Montgomery said. “But these gifts are ultimately paid for by the borrower through a higher mortgage amount. The home buyers are often unaware that the ‘gift’ is something they end up paying for and is not a ‘gift’ at all.”

Almost 200 charities nationwide — one of the largest is AmeriDream in Gaithersburg — have participated in such arrangements. But the Internal Revenue Service and other government entities have raised concerns, particularly after the GAO study found that borrowers receiving assistance from the charities were more than twice as likely to default or become delinquent than other FHA borrowers were.

In a ruling last year, the IRS went so far as to call the seller-financed programs “scams,” accusing the charities of inflating home prices.

“Down payment assistance programs administered by charities have unfortunately been an area where my investigations and the IRS have found a great deal of abuse,” said Sen. Charles E. Grassley (R-Iowa), who has pushed for changes.

Ann Ashburn, president of AmeriDream, criticized the FHA rule and said there is no evidence that down payment programs raise prices.

The housing market has deteriorated so much that home prices cannot be inflated, she said. “At the end of the day, the buyer has the ultimate say.”

Borrowers with FHA-insured loans will still be able to get down payment assistance from family, employers, governmental entities or charitable organizations. But Ashburn said seller-financed down payment assistance has accounted for 30 to 50 percent of FHA purchase loans in recent years. The new rule, she said, would keep low-income borrowers from buying homes and further weaken the housing market.

“The rule does discriminate between the haves and the have-nots,” she said. “People who have money from mom and dad or have money on their own are still okay . . . but people who have no access to any sources — those are the have-nots — that group is now going to be discriminated against.”

The Mortgage Bankers Association also blasted the ruling. The programs provide “important assistance to cash-strapped borrowers,” said Steve O’Connor, the association’s senior vice president of public policy.

“While there is a need for stronger quality control measures, we shouldn’t throw the baby out with the bathwater and end the program,” he said.

Others called the ruling prudent.

“Given the poor performance of these loans, we can understand why . . . [the FHA] took the steps they did to shut it down,” said Allen Fishbein, director of housing and credit policy for the Consumer Federation of America.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 214 [Docket No. FR-4798-F-02] RIN 2502-AH99
TITLE: Housing Counseling Program
AGENCY: Office of the Assistant Secretary for Housing–Federal Housing Commissioner, HUD.
ACTION: Final rule.
 
SUMMARY: This rule establishes regulations for HUD’s Housing Counseling program, as authorized by the Housing and Urban Development Act of 1968, and for which, for the past several years, notices of funding availability have been issued on an annual basis. This final rule follows publication of a December 23, 2004, proposed rule that adopted and augmented the Housing Counseling program requirements with which grantees and housing counseling agencies are already familiar. This final rule takes into consideration the public comments that were received in response to the proposed rule and makes several changes to the proposed regulatory text at this final rule stage.
 
DATES: Effective Date: October 29, 2007.
 
FOR FURTHER INFORMATION CONTACT: Ruth Roman, Director, Office of Program Support, Office of Housing, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 9274, Washington, DC 20410- 8000, telephone, (202) 708-0317. (This is not a toll-free number.) Individuals with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Information Relay Service at: (800) 877-8339.
 
AND
 
Client Management System (CMS) Requirements:
 
The deadline for Client Management System (CMS) compliance, October 1, 2007, is almost here and HUD’s final regulation mandating the use of a CMS was published in the Federal Register today.  The final rule is attached and should be opened in Adobe Reader.  However, while a few CMS vendors are now offering fully functional products that interface with HUD, we understand that most are still putting the finishing touches on their systems. 
 
If you or your CMS vendor has not completed the interface to HUD’s database, don’t worry.  You will not be terminated from the Housing Counseling Program if the CMS interface is not completed by October 1st.  In light of system development delays, HUD will require by October 1st only that you collect client level data:
 
1. Through a CMS vendor that has built an interface or is working to build an interface to HUD; or
2. Through your own CMS as long as you are working with HUD to build an interface with our database.
 
You will need to use a fully functional CMS that interfaces with HUD’s database by the time you submit your FY 2008 First Quarter Report to HUD in January, 2008. 
 
New Reporting Requirements
 
Reporting requirements have changed fundamentally.  Beginning in FY 2008, HUD is requiring that client level data must be submitted on a quarterly basis. Required agency profile data elements have also been expanded.   Client level and agency profile data submitted must include all required data fields in the Interface Control Document (ICD).  There is a separate set of client level data requirements for one-on-one counseling and group education.

FHA Connection Change for FHASecure Loans:

Beginning September 24, 2007, lenders can request a case number on the Case Number Assignment page in the FHA Connection for conventional refinance loans with delinquencies under the FHASecure Initiative, per Mortgagee Letter 2007-11.  Conventional refinance loans will be identified on the Case Query page in the Case Type field as either Conventional Refi - Delinquent or Conventional Refi - not Delinquent.

Advanced Notice

This week we are anticipating that HUD will issue its final rule on down payment assistance (DPA) and attempt to eliminate all forms of “seller-funded” DPA.  If HUD takes this action, it will be challenged in order to protect homeownership opportunities for low-and moderate-income (LMI) homebuyers and your ability to serve them.

Congressional Support for DPA & Lower Income Homebuyers

Federal lawmakers have recently passed legislation supporting privately-funded DPA programs and barring HUD from implementing its rule on DPA.

The House of Representatives, by an overwhelming margin, has passed the Expanding American Home Ownership Act of 2007, which includes an amendment by Congressman Gary Miller to allow qualified DPA providers to participate in the FHA program. Also, the House passed its version of 2008 funding for HUD which includes language protecting DPA and LMI homebuyers by eliminating any funding for HUD to implement its DPA rule.

As the Senate works on passage of its FHA reform legislation, concerns about HUD’s actions have been raised. In a recent interview with National Mortgage News, Senator Allard stated, “HUD seems to feel they have the authority to move forward on their own. At the very least, I think they need to consult with the Congress and seek out our consent.”

As you know, Nehemiah and AmeriDream have a long history of successfully protecting and advancing homeownership opportunities for LMI homebuyers. Once again, we are prepared to protect opportunities for the homebuyers we serve.  Look for additional information from us as events unfold.  Be assured that we will continue to be your trusted source of information on this important matter.

Go to getdownpayment.com for more information.

Taking a look at the FHASecure mortgage loan again here from an insider’s perspective.  What we’re seeing is that FHA lenders are somewhat hesistant to offer the FHASecure mortgage loan for a couple of reasons.

One reason an FHA lender doesn’t want to rush out and offer an FHASecure mortgage loan is the potential problem for delinquency.  It is true that the program is sponsored by HUD, although in the event of future default, each FHA lender is evaluated based on the total percentage of FHA loans in default compared to the total FHA loans originated.  The addition of FHASecure will arguable increase the likelihood that FHA default rates for that FHA lender could increase somewhat.  This is a present problem for the FHASecure lenders - or for those FHA lenders who might otherwise offer the FHASecure refinance.

At least those are my thoughts on the FHASecure refinance at this point.  I’m sure we will see more FHASecure lenders entering into the FHA refinance market for FHASecure as time goes on.

Who wants to be the FHASecure frontrunner?  That remains to be seen.

This MORTGAGEE LETTER 2006 -14 details the requirements for FHA property flips and the appraisal requirements.

SUBJECT: Property Flipping Prohibition Amendment

 On June 7, 2006, HUD published a final rule in the Federal Register amending regulations at 24 CFR 203.37a prohibiting property flipping in HUD’s single-family mortgage insurance programs by providing additional exceptions to the time restrictions on sales. The rule and this mortgagee letter become effective for mortgages endorsed for insurance on or after July 7, 2006.  This Mortgagee Letter also rescinds, in their entirety, Mortgagee Letters 2003-07 and 2005-05.

 The additional categories of properties exempted from the time restrictions include sales of properties by:

· State and Federally chartered financial Institutions and government-sponsored enterprises (GSEs) (e.g., Fannie Mae and Freddie Mac)
· Local and State government agencies 
· Nonprofits approved to purchase HUD REO properties at a discount
hud.gov/offices/hsg/sfh/np/np_hoc.cfm
· Sales of properties within Presidentially-Declared Disaster Areas (upon FHA’s announcement of eligibility in a mortgagee letter specific to said disaster)

Prohibition on Property Flipping Described

 Property flipping is a practice whereby a property is resold a short period of time after it is purchased by the seller for a considerable profit with an artificially inflated value, often abetted by a lender’s collusion with the appraiser.  FHA’s policy prohibiting property flipping eliminates the most egregious examples of predatory flips of properties within the FHA mortgage insurance programs.

Overview of FHA’s Property Flipping Policy

 FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value.  FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months. 
           
Sale by Owner of Record

 To be eligible for a mortgage insured by FHA, the property must be purchased from the owner of record and the transaction may not involve any sale or assignment of the sales contract. This requirement applies to all FHA purchase money mortgages regardless of the time between resales.

 The mortgage lender must obtain documentation verifying that the seller is the owner of record and submit this to HUD as part of the insurance endorsement binder; it is to be placed behind the appraisal on the left side of the case binder.  This documentation may include, but is not limited to, a property sales history report, a copy of the recorded deed from the seller, or other documentation such as a copy of a property tax bill, title commitment or binder, demonstrating the seller’s ownership of the property and the date it was acquired.  Mortgagees participating in the Lender Insurance program (see ML 2005-36) are to retain this documentation and provide it to FHA upon request. 

Resales Occurring 90 Days or Less Following Acquisition

 If the owner sells a property within 90 days after the date of acquisition, that property is not eligible security for a mortgage insured by FHA unless it falls within one of the exceptions to the time restrictions on resales set forth in §203.37a(c) of the regulations.  FHA defines the seller’s date of acquisition as the date of settlement on the seller’s purchase of that property.  The resale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA.

 As an example, a property acquired by the seller is not eligible for a mortgage to be insured for the buyer unless the seller has owned that property for at least 90 days.  The seller must also be the owner of record.

Resales Occurring Between 91 and 180 Days Following Acquisition

 If the resale date is between 91 and 180 days following acquisition by the seller, the lender is required to obtain a second appraisal made by another appraiser if the resale price is 100 percent or more over the price paid by the seller when the property was acquired.

 As an example, if a property is resold for $80,000 within six months of the seller’s acquisition of that property for $40,000, the mortgage lender must obtain a second independent appraisal supporting the $80,000 sales price.  The mortgage lender may also provide documentation showing the costs and extent of rehabilitation that went into the property resulting in the increased value but must still obtain the second appraisal.  The cost of the second appraisal may not be charged to the homebuyer.

 FHA also reserves the right to revise the resale percentage level at which this second appraisal is required by publishing a notice in the Federal Register.

Resales Occurring Between 91 Days and 12 Months Following Acquisition

 If the resale date is more than 90 days after the date of acquisition by the seller but before the end of the twelfth month following the date of acquisition, FHA reserves the right to require additional documentation from the lender to support the resale value if the resale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months.  At FHA’s discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.

 FHA will announce its determination to require the additional appraisal and other value documentation, such as an automated valuation method (AVM), through a Federal Register issuance.  This requirement may be established either nationwide or on a regional basis, at FHA’s discretion.

Exceptions to 90-day Restriction

 The following sales are exempt from the time restrictions provided by §203.37a:

· Sales by HUD of its Real Estate Owned
· Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.
· Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.
· Sales of properties that are acquired by the sellers by inheritance.
· Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.
· Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.
· Sales of properties by local and state government agencies.
· Upon FHA’s announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule.  The notice will specify how long the exception will be in effect and the specific disaster area affected.

Inapplicability of §203.37a to New Construction

  The restrictions in 203.37a are not applicable to a builder selling a newly built home or building a home for a homebuyer wishing to use FHA-insured financing.

Date of Property Acquisition Determined by the Appraiser

Mortgage lenders may rely on information provided by the appraiser in compliance with the updated Standard Rule 1-5 of the Uniform Standards of Professional Appraisal Practice (USPAP).  This rule requires appraisers to analyze any prior sales of the subject property that occurred within
specific time periods, now set for the previous three years for one-to-four family residential properties.

As a result, the information contained on the Uniform Residential Appraisal Report or other applicable appraisal report form describing the Date, Price and Data for prior Sales is to include all transactions for the subject property within three years of the date of the appraisal and the comparable sales within 12 months of the date of the comparable sale.  Appraisers are responsible for considering and analyzing any prior sales of the property being appraised within three years of the date of the appraisal and the comparables that are utilized within 12 months of the date of the comparable sale.

Therefore, provided that the URAR completed by the appraiser shows the most recent sale of the property to have occurred at least one year previously, no additional documentation is required from the mortgage lender.  The mortgage lender remains accountable for verifying that the seller is the owner of record and may rely on information developed by the appraiser for this purpose if provided.  However, if the lender obtains conflicting information before loan settlement, it must resolve the discrepancy and document the file accordingly.

Washington, DC - The U.S. House of Representatives today overwhelmingly passed H.R. 1852, the “Expanding American Homeownership Act of 2007,” which will revitalize the Federal Housing Administration (FHA), a federally insured loan program that for over 60 years has been a reliable source of affordable fixed rate mortgage loans, especially for first-time homebuyers.  The measure, originally introduced by Representative Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity, and Barney Frank, Chairman of the Financial Services Committee, will enable FHA to serve more subprime borrowers at affordable rates and terms, recapture borrowers that have turned to predatory loans in recent years, and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments in the midst of the current turbulent mortgage markets.

“There is an affordable housing crisis in America.  In recent months, that crisis has exploded beyond the poorest renters and homeowners, to threaten the domestic economy.  H.R. 1852 is a necessary step in walking us back from the brink and in the direction of meeting the housing needs of all Americans,” said Chairwoman Waters.

“A revitalized FHA program will help future homeowners realize the dream of home ownership, and will prevent many first time and inexperienced home buyers from being pushed into loans that are unaffordable or difficult to understand,” said Chairman Frank.  “The bill we passed today will help people all across America because we have enacted provisions to allow the FHA to insure loans in high cost areas.”

Specifically, the bill includes the following important provisions:

Lower Down Payments.  Authorizes zero and lower down payment loans for borrowers that can afford mortgage payments, but lack the cash for a required down payment.

Housing Counseling.  Authorizes more than double the current funding level for housing counseling, to help subprime homebuyers and borrowers late on mortgage loan payments.

Subprime borrowers.  Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers, without authorizing unnecessary fee hikes on such borrowers.

Reverse Mortgages.  Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses, by removing the loan cap to avoid program shutdowns, raising loan limits, and by reducing the maximum fee lenders can charge for these loans.

Multifamily Loans. Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high cost areas, and enhances sale of foreclosed FHA rental housing loans to localities, so that affordable housing can be maintained in local communities.

Affordable Housing Fund.  Authorizes up to $300 million a year from the bill’s excess profits for affordable housing, instead of returning such funds to the General Treasury.

Higher Loan Limits.  Adopts the Frank/Miller/Cardoza amendment that would raise FHA single family loan limits, which now bar loans above 95% of the median home price in each local area and shut FHA out of higher cost home markets.  The amendment raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national GSE conforming loan limit.  The amendment also retains the bill’s provision for a nationwide FHA loan floor of 65% of the GSE conforming loan limit, and gives HUD authority to raise these loan limit amounts by up to $100,000 “if market conditions warrant.”
 
In addition, the House adopted an amendment to the bill to direct FHA to make available refinancing loans to existing qualified homeowners who are in default or at risk of default due to rate resets or mortgage market conditions, and to authorize lower down payments for such purpose.  The amendment also includes provisions to address problems arising from inflated appraisals.

(source=house.gov/apps/list/press/ financialsvcs_dem/press0918072.shtml)

There was a one hour and seven minute FHA Secure conference call last Wednesday September 12, 2007.  Since there were only 400 lines available, I’m guessing a lot of you missed the FHASecure training call.  Thankfully, the FHA Loan Expert Blog has a copy of the call to share with you.  Enjoy!

FHASecure Training Call

Expanding American Homeownership Act of 2007

As ordered reported by the House Committee on Financial Services on May 3, 2007

SUMMARY H.R. 1852 would amend the National Housing Act to authorize the Federal Housing Administration (FHA) to implement a new pricing structure for the mortgage guarantees itoffers. This legislation also would remove the statutory limitation on the number of reversemortgages that FHA can insure and would make other changes to the Home Equity Conversion Mortgage (HECM) program. In addition, this legislation would authorize the appropriation of funds to provide certain borrowers with financial counseling and to establish a new affordable housing fund.

Enacting H.R. 1852 would increase direct spending by allowing the Department of Housingand Urban Development (HUD) to sell certain properties at below-market prices without an appropriation of funds to offset any forgone sales proceeds. That provision would modifythe cost of some previous and outstanding loan guarantees. As a result, CBO estimates that enacting H.R. 1852 would increase direct spending by $16 million in 2007.

CBO also estimates that implementing H.R. 1852 would result in a net increase in offsettingcollections (a credit against discretionary spending) of $313 million in 2008 and $628 millionover the 2008-2012 period, assuming that appropriation laws necessary to implement the FHA programs and the Mortgage-Backed Securities (MBS) program of the Government National Mortgage Association (GNMA) are enacted.

H.R. 1852 contains no intergovernmental or private-sector mandates as defined in theUnfunded Mandates Reform Act (UMRA) and would impose no costs on state, local, ortribal governments.

Amendments to the HECM Loan Insurance Program. HECM loans are considered to be“reverse mortgages” because they enable homeowners who are at least 62 years of age towithdraw some of the equity in their homes in the formof monthly payments, in a lump sum,or through a line of credit. Under current law, FHA is permitted to guarantee up to acumulative total of 275,000 such loans, although this limitation has been waived throughfiscal year 2007. This cap has already been reached this year; consequently, the program will be inactive beginning in 2008 unless the cap is amended.

Loan size is tied to loan limits that vary by geographic region, and such loans cannot be used to purchase another home. In addition, the origination fee charged by lenders is calculatedas a percentage of the home’s value.

Enacting this legislation would remove the statutory limitation on the number of loans thatcould be guaranteed, set a single nationwide limit on the dollar amount of a HECM loan thatwould be tied to the conforming loan amount, limit the origination fee to 2 percent of theloan amount (subject to a minimum allowable amount), and allow borrowers to use HECMloans to purchase a new home. (Conforming loans have terms and conditions that follow the guidelines set forth by the Government Sponsored Enterprises (GSEs); the conforming loanamount is $417,000.)

Implementation of the HECM program, like all of FHA’s insurance programs, is contingenton the enactment of appropriation laws that provide annual loan commitment authority.Thus, the estimated budgetary impact of this proposal is considered to be discretionary, andit is tied to the demand for HECM loans and the estimated subsidy cost of the loan guarantees. Because, under credit reform procedures, guarantees of HECM loans are estimated to have negative subsidies (that is, they earn money for the government), CBOestimates that implementing those amendments would increase offsetting collections byabout $2.1 billion over the 2008-2012 period.

Demand for HECM Loans. According to the National Reverse Mortgage Lenders Association (NRMLA) and other industry experts, the HECM program has risen inpopularity in recent years. As more consumers are becoming aware of the product, morehouseholds are becoming eligible for the program (currently over 17 million households haveowners who are age 65 or older, according to census data), and more seniors view theproduct as an alternative approach to financing home-improvement projects, medical costs,and other needs. In addition, sources in the mortgage industry have observed an increasingdemand among seniors for new housing within senior communities. The number of HECMloans insured by FHA more than doubled from 2003 to 2006 (18,000 loans were insured in 2003, compared with 76,000 loans in 2006). Furthermore, based on the number of HECMloans insured as of April 2006, that volume could reach over 100,000 loans by the end offiscal year 2007.

Based on information from FHA, NRMLA, and other industry experts, CBO estimates thatsetting a single nationwide loan limit and permitting borrowers to use HECM loans topurchase a new home would result in a product that would be more attractive to borrowersand more easily marketed by lenders, resulting in increased demand for HECM loans. Onthe other hand, the limit on the origination fee could result in a programthat is less profitablefor certain lenders, causing some to end or limit their participation in the program. A lowerorigination fee, however, could increase the program’s attractiveness to some borrowers, assuming lenders do not increase interest rates significantly to compensate for lower origination fees.

Currently, the market for FHA’s HECM loans appears to be very robust, and under this bill,FHA would probably insure more than 100,000 loans annually over the next several years.Also, GNMA’s recent decision to begin securitizing HECM loans could result in increased activity by lenders, as investors in the secondary mortgage market begin to invest inmortgage-backed securities that include this product. Whether the number of guaranteescould exceed 100,000 loans on a continued basis each year would depend on FHA’s ability to administer and manage the program in an efficient manner and on the market’s responseto this bill, especially the change in the origination fee. Based on information from FHA,CBO estimates that the agency could insure about 110,000 loans (with a face value of about$27 billion) in 2008. In subsequent years, we estimate that demand would increase at theestimated rates for appreciation in housing prices—about 2 percent to 4 percent a year

Raising Loan Limits for the Single-Family Program. Section 3 would raise FHA’s loan limit—the dollar amount of a mortgage that FHA can insure—for its single-family program from 87 percent of the conforming loan amount to 100 percent of the conforming loan limit in certain geographic regions where the cost of housing is very high. Effectively, this wouldbe a change from insuring loans of $362,790 today to insuring loans of up to $417,000 incertain parts of the country. In less expensive markets, the limit would be raised from48 percent to 65 percent of the conforming loan limit, or a change from loan guarantees of up to $200,160 to loan guarantees of up to $271,050 under the bill.

CBO estimates that implementing this provision would increase loan volume by about8 percent a year—about $4 billion annually in additional loan guarantees—over the next fiveyears. This increase would stem mostly from increasing the limit in the less expensivehousing markets. Despite this estimated increase in loan volume, CBO estimates that noadditional offsetting collections would be realized because we expect the subsidy rate for thesingle-family program to be zero over the next five years. However, because most FHAsingle-family loan guarantees are included in GNMA’s MBS program, CBO estimates that raising the loan limit would result in additional offsetting collections to GNMA of about$45 million over the 2008-2012 period. As mentioned earlier, GNMA requires appropriationaction to establish its dollar limitation for the securities program, so those savings would beoffsets to discretionary spending.

Limit on Increases in Fees for Mortgage Insurance. Currently, FHA has the authority toadjust fees for its mortgage insurance programs through administrative action. Section 30would prohibit FHA from increasing fees unless the increase is required to maintain theestimated credit subsidy for the program at zero, but not less than zero. According to theAdministration, annual fees for new loan guarantees for the apartment development and refinance programs will increase by about 16 basis points beginning in 2008. CBO estimates that those fee increases would affect about $2.6 billion in loan guarantees in 2008 and over$3 billion in loan guarantees annually in subsequent years. Furthermore, we estimate that those fee increases would increase offsetting collections for this program by $192 million over the 2008-2012 period. Thus, prohibiting those fee increases would result in a loss of$192 million in discretionary offsetting collections over the next five years.

Risk-based Pricing and Flexible Downpayment Requirements. Currently, FHA’s single-family loan guarantee program has a flat premium structure under which all borrowers paythe same up-front and annual fees, regardless of the borrower’s individual risk of default.According to the FHA, the up-front fee in 2008 is expected to increase from 1.5 percent to1.66 percent and the annual fee will rise from 0.5 percent to 0.55 percent. Furthermore, theAdministration estimates that those fee increases will result in a subsidy rate of zero for thesingle-family program for 2008.

Under this legislation, FHA would have the authority to match the fees it charges with the borrowers’ risk of default or the risk associated with a particular loan product, and to offerguarantees for loans with little or no downpayment. For certain borrowers and types of loanproducts, the up-front fee could be as high as 3 percent and the annual fee could be as highas 0.75 percent. CBO estimates that implementing this risk-based pricing proposal wouldresult in a weighted subsidy rate that is about zero. Because the subsidy rate for 2008 isestimated to be zero under current law, CBO expects that FHA would charge rates underH.R. 1852 that would produce a similar result.

All –

Conference call briefing and question/answer session on FHASecure:

Based on the volume of inquiries our FHA Call Center is receiving on FHASecure, we believe that all of you in the industry may have more questions that have surfaced since we published the mortgagee letter.  Therefore, we’d like to invite you and your members and/or affiliates to participate in a briefing and question/answer session on FHASecure.  

The call is scheduled for Wednesday, September 12, 2007 at 1.00 pm (Eastern Time).  There will be 400 lines available, and they will be offered on a first-come, first-serve basis. 

The call-in number is: (866) 207-0378 

The code is: 16526926

Thanks and we look forward to having you participate in the call!

AND

MBA bimonthly conference call with senior FHA staff for MBA members:

MBA is pleased to announce a bimonthly conference call with senior Federal Housing Administration staff for MBA members.  These meetings provide an excellent opportunity for members to learn first hand about changes and developments to the FHA’s single-family program from key decision makers in the Administration. 

The first meeting — September 18 at 2:00 p.m. E.T. — provides members with important information regarding the recently-announced “FHA Secure” initiative, which seeks to enhance FHA’s refinancing program in order to assist homeowners at risk of foreclosure.  FHA will also discuss the recently announced transition to risk-based pricing for mortgage insurance.

Each 90-minute meeting includes a general question-and-answer time set aside to allow members the opportunity to address specific issues they are facing in the day-to-day business of FHA lending.

Members Who Should Participate

• Wholesale and retail originators
• Brokers and loan correspondents
• Residential underwriting professionals
• Credit policy professionals
• Quality assurance professionals
• Individuals interested in learning about current government housing programs

The first conference call is scheduled for Tuesday, September 18 at 2:00 p.m.  Subsequent calls take place on the third Tuesday of every other month thereafter. 

AND

9th Annual Mortgagees Conference:

September 24-25, 2007 - Washington DC. 9th Annual Mortgagees Conference. Top program directors, including HUD’s Assistant Secretary for Housing - Federal Housing Commissioner Brian D. Montgomery, will lead the discussions on new FHA developments, like FHASecure, and Risk Based Premiums along with private lenders, and servicing experts. This year’s program also features a special “HECM 101″ add-on session for lenders and servicers interesting in FHA’s booming reverse mortgage program. For details and program brochure, call: 301-657-8220 or visit the website.