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HUD on Housing Bill - Not real happy?

HUD Secretary Steve Preston in a press release hints that the Housing Bill will force FHA to "increase prices on all customers or eliminate its refinancing program for subprime borrowers at a time when they need it the most. "

The press release regarding FHA provisions in the Housing Bill is available on HUD's website. The release is dated July 23, but I have not found any updated releases on the website. It seems to me that HUD received most of their requests with the Housing Bill.

Certainly they were able to ban Down Payment Assistance. They increased the minimum investment requirement from 3% to 3.5%. It was not too long ago that HUD was ready to implement a reduced down payment, but I guess recent developments forestalled that initiative.

High delinquencies combined with increased market share for FHA as a result of the loss of other high loan to value (LTV) financing options. Likely also that the expected volume increase from refinancing the subprime loans is another consideration to increase the minimum investment requirements.

I have not heard how the roll back of tiered MI pricing will be implemented, but judging from the secretary's statement, we may be looking at an across the board increase, as well as a departmental reluctance to refinance the borrowers who are targeted for foreclosure relief in the Housing Bill.

There are a lot of questions still unanswered in this bill. I hope that in an effort to address pressing matters, the bill was not rushed so quickly that provisions were left in place that were not fully considered and would not have otherwise been approved.

Richard Smith
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

Posted by Richard Smith Mortgages Home Loans FHA TN GA AL on 07/28/2008 03:06 PM

Comments (6)

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Originally posted at: Richard's Real Estate Thoughts: HUD on Housing Bill - Not real happy?

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6 Comments on HUD on Housing Bill - Not real happy?

JUL

2008

Richard, it truly will be interesting how the fuel will hit the fire. As we see more tightening in the lending world it just begs to ask, "What next?"

The first thing that I noticed was that a home owner must (1) default, (2) ruin their credit (3) sign away 1/2 their future equity in order to qualify.

Ugh!!!

1st Time Homebuyers with little experience should have headed our advice. " The downpayment assistance program won't last long". Given the current crisis it makes sense but many consumers don't quite understand the reality.

JUL

2008

Tracy,

I really liked the DPA program, but it is gone. Rural development, VA, and those who can qualify for one of the various grants, otherwise folks need to save a downpayment.

It is going to make a tough market tougher. I still think the program could have worked with some modifications designed to address the added risk.

I have not checked yet with some of the DPA companies for their response. It had become a sizable industry.

Thank you for coming by, I am enjoying andlearning so much from your posts.

Richard

Lenn,

Thanks for commenting. I take it that FHA is not excited about becoming the subprime lender of last resort - although I think a borrower getting such a significant rate and balance reduction should be able to make the payment.

Those who purchased the same property at the same price, but qualified for a conventional rate end up owing more. The refinanced loans give a pretty significant equity boost. It might help make the credit impact of several mortgage late payments a little more palatable.

And if the alternative is foreclosure, it seems to me quite the deal.

Actually though I expect it to work as well as the FHA Secure loan has worked, which is not so good.

I have not figured out who is doing the new loan. Is the present lender refinancing the new loan or will borrowers be able to refinance the new loans with a lender of their choice.

My read of the press release is that HUD is not too excited.

Thanks,

Richard

Mark,

What next - I do not know. I have been getting MI updates in my emails - more restrictions and higher premiums.

I turned down a 700 score experienced investor who showed a significant loss on her returns. She was incredulous that I did not have a stated program.

I have had 6 lenders deny an Accept Plus (no income documentation required) approved loan (700+ scores) self employed borrower with several hundred thousand in the bank, $417,000 loan on a 1,000,000 appraisal - 42% LTV, because the income on the application is deemed high.

What next - credit, credit, credit. Get with an LO who can help maximize credit score improvement. There are some provisions deep within the Housing Bill to make better provisions for alternative credit.

That is why I wrote my post on ethical credit repair.

Man there is so much in that bill, and it is like reading sanskrit. The words make no sense.

We will just have to work with our clients harder and longer, and our clients will have to exhibit patience and persistence to work through a plan.

And at some point when the market restrictions become too painful we will get some programs back.

The buyer, realtor, originator partnership will be important to each party.

My thoughts anyway.

Thanks,

Richard