On Aug. 31, President Bush announced Federal Housing Administration (FHA) changes called "FHASecure" to help homeowners avoid foreclosure. In a key policy shift, the federal mortgage insurer FHA is allowing subprime borrowers with good payment histories and at least three percent in home equity to refinance to safe FHA financing.
FHASecure, a program announced on Aug. 31, 2007, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will offer unprecedented foreclosure prevention assistance.
The risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.
The mortgagee letter extends eligibility to borrowers who became delinquent under their current mortgage following the reset of the interest rate.
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 of employment; and
- sufficient income to make the mortgage payment.
Appraiser Responsibilities under the FHASecure program:
From: MORTGAGEE LETTER 2007-11
September 5, 2007
TO: ALL APPROVED MORTGAGEES
ALL FHA ROSTER APPRAISERS
Appraisal Practices in Declining Markets
Historically, FHA has provided a counter-cyclical force in helping to stabilize declining housing markets and will continue to do so. In fact, much of FHAs business activity this year has been in those states (e.g., Ohio, Michigan, Indiana) that have suffered sustained depreciation of home prices due to job losses and increased foreclosures. Nevertheless, recent property value declines in certain markets suggest the need to reiterate our guidance to mortgage lenders to ensure that appraisers are providing accurate property valuations. A declining market could be as small as a neighborhood or as large as an entire state, and no standard definition exists other than home prices are falling.
Appraiser Responsibilities
The purpose of the appraisal is to provide the lender/client with an accurate, and adequately supported, opinion of market value.á It is the appraisers responsibility to determine whether a property being appraised is located in a declining market.
The neighborhood section of each property specific appraisal form contains a housing trends section where the appraiser marks a box indicating property values are increasing, stable or declining.- Whichever box is selected, the appraiser is certifying that he/she has performed an objective analysis of quantifiable data supporting the observations made.
If a property is located in a declining market, the appraiser must provide an explanation in the Market Conditions section of the appraisal report that includes relevant information in support of the conclusions relating to trends in property values, demand/supply and marketing time. The appraiser must also provide a description of the prevalence and impact of sales and financing concessions and/or down payment assistance in the subjects market area. Other areas of discussion may include days on market, list-to-sale price ratios, and/or financing availability.
Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the WinTOTAL Users Group an email forum for appraisers.
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