Mortgage Forum

Joel Fraser

Take a look at the new Senate bill that the House is trying to pass for FHA loans.Do you really think any lenders would agree to write down loan balances to 90% of the current appraised value? What happens to the other 10%???? I guess we need to come up with more money?? Not to mention all the fees involved!!I love the part where that want homeowners too agree to share with the government any profit we may receive from selling or refinancing our homes! Last time I checked the government wasn’t making our house payments, we are…so why should they get a piece of the pie?!They may as well do away with FHA loans…changing the guidelines will only hurt sellers and buyers. I believe FHA loans let you buy or refinance with a low down payment. By not having income limitations or credit scoring, many people will qualify for a HUD home because they can afford the monthly mortgage payments and have reasonable credit. Not any longer after they put the new FHA guidelines in placeFHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes. Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging."We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment. Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000. Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.The House bill had contained a modified form of the down payment assistance program.The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision. First Published: July 10, 2008: 2:09 PM EDTFannie and Freddie plunge on rescue report 6 months, 343,000 homes lostPace of housing rescue slows, as foreclosures rise