As many of you have heard in the news- President Bush sign the bill H.R.3221 into law on July 30, 2008. This bill encompasses many separate Acts and Provisions including: The FHA Modernization Act, The Mortgage Disclosure Improvement Act, The Building American Homeownership Act, so on and so forth.
I offer for you here, some condensed information on what has actually come through and how it will impact us. This is, obviously, still in its infant stage and (as with most of our legislation) still left for interpretation but I will be sure to distinguish here what is said and what is speculation.
What I feel is the most important part of this legislation is The FHA Modernization Act of 2008, if only for the sheer bulk of changes in relation to the rest of the bill.
(Sec. 113) Raises the FHA minimum borrower contribution to 3.5% and officially prohibits the use of any down payment assistance programs. This should be a minimal impact though because the lenders had pretty much done away with this on their own.
(Sec. 115) Makes permanent the ability of HUD to insure Rehabilitation loans- so the 203k is here to stay. I am hoping, again hoping that this means that considerable thought will be put into cleaning up the processing of these loans since rehabilitation is very important to Michigan's housing market.
(Sec. 122) Will open the Home Equity Conversion Mortgage to be used to purchase a new home. This is also a very important bit because it will allow many seniors that can not sell their current home the chance to purchase a new home using the equity of their current home to cover the payments.
(Sec. 124)Will offer a five-year pilot program to offer mortgages to borrowers that do not have traditional credit as an automated process. So, hopefully the borrowers that only have rent, utilities, insurance and these types of non-traditional credit can enjoy the same streamlines credit rating as borrowers with a normal FICO risk assessment. This, if implemented properly, should really open up FHA mortgages to a lot of new borrowers.
Those are what I fell will have the biggest impact on our business, specifically in Michigan. Some other notable changes this legislation implements on FHA mortgages include: limiting the increases in risk-based MIP (which has skyrocketed lately for borrowers under 620), Increasing loan limits, tightening down on kickbacks and unearned fees, and introducing further criminal action against fraudulent activity.
I will be writing a separate blog for the remainder of H.R. 3221, the above is strictly about the FHA portion, so check that out too because it has the most exciting piece of news of the entire bill! I hope you find this helpful and if you would like easy access to the actual paperwork I have included a link to the Library of Congress page below.
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.3221:
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