Well now that I have a blog, I guess I better start using it.

I wanted to talk a little bit about the FHA reform that will be taking place very soon. First of all some of you may not have a full understanding of what FHA even is or does.  I think Jeanne Sahadi from CNNMoney.com explained it perfectely here:

“The FHA program is intended for mortgage borrowers with weak credit or little or no cash who may not be able to otherwise get an affordable mortgage.

Borrowers get FHA loans from a private lender just as they would any other mortgage. But they pay a small premium to the FHA every month.

The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent. That gives borrowers a better chance of keeping their homes should they fall on hard times. If a lender does have to foreclose, the FHA will pay the lender the unpaid principal on the loan, forgone interest and a portion of the foreclosure costs.

FHA loans typically have better rates than other subprime mortgages and don’t carry prepayment penalties.

And since most FHA mortgages are 30-year fixed rate loans, the lender won’t make the loan unless he has proof the borrower will be able to make the monthly payments. One of the reasons for the subprime mess is that lenders didn’t require proof that borrowers could make their payments or only required that they could make the payments at the low initial rate of an adjustable-rate mortgage.”

The changes proposed by law makers would raise loan limit amounts permanently, right now the limits have been hiked but only until Dec. 31,2008 as part of the economic stimulus package.  The reform would also lower down payment requirements which is one point the senate and house disagree on, the senate wants 1.5% and the house wants 0%. The last and I believe most important to our economic health is the ability to refi into a FHA loan for the people who have high-cost loans. More that 50% of the listings today are foreclosure or pre-foreclosure homes. This is absolutely unacceptable not only does this mean more and more people are losing their homes but the people trying to sell their homes have to compete with a large corporate entity who doesn’t mind losing money to avoid a hassle.

Well thats my 2 cents.

Matthew Callender

Keller Williams Classic Realty