Transcript FHA Training for Real Estate Professionals

FHASecure
Presented by:
US Department of Housing and Urban Development
(HUD)
Last Revision: 10/1/07
General
Assist borrowers currently in a conventional ARM loan
♦ Delinquent
 Result of the ARM reset
 Must meet all eligibility criteria for FHASecure
 Combined loans may exceed CLTV and maximum
mortgage limits
♦ Not Delinquent
 Combined loans may exceed CLTV and maximum
mortgage limits
 Must meet regular No-Cash-Out (NCO) refinance criteria
2
General (cont’d)
♦ Program available until December 31, 2008 (Mortgagee
Letter 2007-11)
♦ Any FHA lender can originate
♦ Fixed rate loans are NOT eligible. This includes Interestonly, as well as mortgages with buydown features
incorporated into the interest rate or payment options.
♦ May be refinanced to an ARM loan (one-year or hybrid)
♦ A second mortgage may be taken at the time of closing for
the amount not eligible for inclusion in the FHA insured first
mortgage.
♦ FAQs can be accessed at www.fha.gov
3
BENEFITS
♦ Helps borrowers stay in their homes and preserves
communities
♦ Could assist nearly 80,000 additional borrowers
♦ Permits an opportunity for borrowers to refinance
into a prime-rate FHA insured mortgage
♦ Help lenders avoid foreclosure expenses
♦ No CLTV limit or seasoning requirement for
purchase money seconds
4
Eligibility
♦ Single-Family (1-4 units)
♦ Owner-occupied, principal residence
♦ Must meet FHA underwriting criteria for new loan
♦ Current FHA geographical maximum mortgage limits
apply (for FHA-insured first mortgage)
♦ Current FHA maximum loan-to-value limits apply
♦ May cover existing first lien, purchase money second,
closing costs, prepaid expenses, discount points, late
charges, arrearages, foreclosure expenses, and other
costs
5
Eligibility - Delinquent
♦
♦
♦
♦
♦
♦
♦
Non FHA-ARM that has reset
Must be currently delinquent
Delinquency resulted from reset
The previous consecutive 6 months of payments, prior to the
reset, was made within the month due
Must have sufficient equity in home
OR
Lender can take a 2nd mortgage for amount not included in
FHA-insured first mortgage
OR
Current lender agrees to write off the amount not eligible for
inclusion in FHA-insured mortgage.
6
Eligibility – Not Delinquent
♦ Can assist borrowers who are current on their
mortgage, but are either facing an ARM reset or have
already had an ARM reset
♦ Underwritten the same as a regular No-Cash-Out
(NCO) refinance, with the following considerations
♦ Combined loans may exceed the CLTV and maximum
mortgage limits
♦ 2nd liens do not have to be seasoned for one year, and
additional mortgage calculation is not required
♦ 2nd liens may be subordinated without consideration of
CLTV
♦ Delinquent/derogatory debts resulting from the borrower
choosing to pay the mortgage instead of other obligations
7
Underwriting
♦ FHASecure does NOT modify or waive FHA underwriting
guidelines and requirements
 Basic eligibility (owner-occupancy, SSN, CAIVRS, LDP,
GSA, etc.)
 Willingness: Credit history analysis, including
explanations and/or documentation
EXAMPLE: A borrower has insufficient income to pay
the increased mortgage amount after the reset, along
with other debts. They chose to pay the mortgage,
resulting in other debts becoming delinquent. If the
derogatory items can be documented as resulting
from the reset, that should not inhibit an approval of a
regular NCO refinance.
8
Underwriting (cont’d)
 Income/Employment
• Ability – best indicated by ratios (if exceeded, may
use valid and sufficient compensating factors)
• Stability – two years employment history and
expectation income level will continue for first 3 years
of the loan
• Note: If 2nd mortgage payments are required within
first 36 months, must include in ratios.
 Assets (if required for closing)
♦ The lender must specify in the Remarks section of the HUD92900-WS how they determined that the reset resulted in
the delinquency
9
Underwriting (Cont.d)
♦ Lenders may use TOTAL Scorecard, but are
reminded that manual underwriting is required if a
“Refer” result is received
♦ Documentation
♦ Standard FHA refinance loan documentation
♦ Evidence of the ARM reset (Delinquent and, as
applicable, Not Delinquent loans)
♦ Payment history showing that, prior to reset, the
borrower made the previous 6 months of mortgage
payments within the month due (Delinquent loans only)
10
Lender Responsibilities
♦ Encourage borrowers to seek advice on tax
consequences of debt write-off
♦ Ensure accurate property valuations in declining
markets
♦ Refrain from soliciting homeowners to cease
making mortgage payments in order to qualify
for FHASecure
11
Contact Information
FHA Resource Center
1-800-CALL FHA (800-225-5342)
[email protected]
HUD-Approved Housing Counseling Agencies
1-800-569-4287
HUD’s Loss Mitigation Center
1-888-297-8685
Lender Approval and Recertification Division
E-Mail: [email protected]
Voice Mail: 202-708-3976
HUD Web Site
www.fha.gov
12
Thank You!
13