The Federal Housing Administration, generally known as "FHA", provides
mortgage insurance on loans made by FHA-approved lenders throughout the United
States and its territories. FHA insures mortgages on single family, multifamily,
manufactured homes and hospitals. It is the largest insurer of mortgages in the
world; insuring over 34 million properties since its inception in 1934. Online
President George W. Bush announced on 8/31/07 that HUD's Federal Housing
Administration (FHA) will help an estimated 240,000 families avoid foreclosure
by enhancing its refinancing program effective immediately. Under the new
FHASecure plan, FHA will allow families with strong credit histories who had
been making timely mortgage payments before their loans reset--but are now in
default--to qualify for refinancing.
In addition, FHA will implement risk-based
premiums that match the borrower's credit profile with the insurance premium
they pay--i.e., riskier borrowers pay more. This commonsense, risk-based pricing
structure will begin on January 1, 2008.
"Many hard-working American families who were
able to make their mortgage payments under the initial teaser terms of the
exotic loan are now struggling to make ends meet because their rates have
doubled or tripled," said HUD Secretary Alphonso Jackson. "FHASecure will bring
stability to the housing market and give eligible families who were in good
financial standing before their loans reset a chance to keep their homes."
The combination of FHASecure and risk-based
premium pricing will permit FHA to return to the role it was originally designed
to play, bringing stability to the real estate market by helping break today's
cycle of foreclosures and price depreciation and creating much needed liquidity
in the now-constricted mortgage market.
FHA has recently experienced a substantial
increase in the number of conventional borrowers refinancing into FHA products.
With FHASecure, it can help even more. The number of these refinancing
transactions has tripled since the start of 2006. FHA's transactions are
projected to surpass 100,000 loans by the end of the fiscal year. To date, these
figures do not include refinances for delinquent borrowers.
The FHASecure initiative will operate under the
same safe guidelines as the FHA's existing mortgage insurance program without
affecting FHA's financial health. Eligible homeowners will be required to meet
strict underwriting guidelines and pay a mortgage insurance premium, which
offsets the risk to FHA's insurance fund at no cost to the taxpayer.
The risk-based insurance premium structure will
further expand FHA's reach to additional underserved borrowers, particularly
minorities and first-time homebuyers who have been disproportionately lured into
exotic mortgages, and enhance the FHA's overall risk management. The move to
risk-based premiums ensures that FHA remains on solid financial footing as a
self-financed agency for the long-term.
FHASecure, like all FHA products, will be
underwritten to ensure the borrowers have the ability to repay the loan, will
require escrow for taxes and insurance, and will continue to offer unprecedented
foreclosure prevention assistance. The FHA has never permitted and will not
include pre-payment penalties or teaser rates that are common in exotic
mortgages and have caused much of the current market troubles.
|To qualify for FHASecure, eligible
homeowners must meet the following five criteria:
|A history of
on-time mortgage payments before the borrower's teaser rates
expired and loans reset .
|Interest rates must
have or will reset between June 2005 and December 2009.
|Three percent cash
or equity in the home.
|A sustained history
to make the mortgage payment.
"FHASecure is designed for families who are good
borrowers but were steered into high-cost loans with teaser rates," said
Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These
homeowners, many of whom are minorities, need a safe, affordable mortgage
product that will help build wealth. All FHA borrowers pay mortgage insurance
premiums to offset claims to the FHA insurance fund and ultimately prevent risk
to the taxpayer."
FHASecure will also bring much-needed liquidity
to the mortgage market. FHA anticipates more lenders will offer FHA-insured
loans, pool them, and securitize them with the Government National Mortgage
Association (Ginnie Mae), which has the full faith and credit of the U.S.
government. This guarantee makes Ginnie Mae's mortgage-backed securities the
safest on the market and helps to channel greater capital into the housing
market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped
almost 35 million people become homeowners, making it the largest insurer of
mortgages in the world. The 109th Congress introduced the Expanding American
Homeownership Act in June 2006 which would enable FHA to be a safe option for
more underserved low- and moderate-income and minority families so they can
achieve the American Dream of homeownership. Today, President Bush also urged
Congress to quickly pass the Administration's FHA modernization proposal to help
more families in need.
For more information about FHASecure and
other FHA products, please call 1-800-CALL-FHA or visit
www.hud.gov. For a list of your local homeownership center or a HUD-approved
housing counseling center, go to