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  • 2015 FHA Programs

     President Obama released the details on a plan for a new lower cost FHA Mortgage Insurance Program. The Plan that President Obama announced last week was to reduce premiums charged by the Federal Housing Administration (FHA).President Obama will seek to address the ongoing housing problem, with a new program that will begin Jan. 26, 2015 and will reduce costs significantly of struggling Americans who pay FHA mortgage insurance payments. This plan will assist many Americans, through providing low insurance rates on federally issued mortgages to first time home purchases, minority Americans and struggling us citizens. This plan, while modest, will produce savings of $900 a year for each home-buyer. The best part of this is it, doesn’t require congress’s approval since lowering FHA fees is under the control of President Barack Obama and the HUD Secretary.

    The FHA program is designed to insure loans made to mortgage borrowers who make down payments that are as small as 3.5% of the value of a house. This is the key that makes the FHA program popular among first time home buyers who may not have a lot of money saved up (or liquidity in current properties). The FHA currently charges 1.35% per year in mortgage insurance fees. The new rate will reportedly be 0.85% per year, a full 0.5% reduction. This will be the equivalent of a 0.5% reduction in interest rates for FHA mortgage holders and could mean savings of up to thousands of dollars per year, there is no doubt that this will be a boon to FHA loan holders and to potential home buyers.

    Other options that Sellers are using to help first time home buyers navigate through the FHA loan program is that to assist the buys with a variety of costs There are a variety of costs that you can pay for your buyer when they choose a FHA  mortgage. FHA has a higher limit to the percentage of the seller credit in comparison to the conventional mortgage, which only allows for a 3 percent seller concession. FHA loans allow a 6 percent seller concession with certain restrictions.

    The seller can pay for discount points to bring the buyer’s interest rate down or closing costs themselves.

    Any other costs that are credited will affect the buyer’s loan amount. These charges include moving costs, costs to repair the home or any other costs in connection with the condition of the home. If you decide to contribute to these costs, the dollar amount of the buyer’s mortgage will go down accordingly. For example, if you give a $500 credit for a home repair, $500 will be deducted from the loan amount, affecting the overall LTV.

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    At Present, FHA mortgage insurance on most 30 year fixed FHA loans is at a rate of 1.35% per year, which is still really good.. With the new guidelines, the mortgage insurance rate will be 0.85% per year. On a $200,000 FHA loan, that is a savings of $84 per month, or about $1000 per year.

    However small, this move by the president shows just how hard it is to recharge the housing sector since the 2008 mortgage crisis. President Obama’s plan  should start a process that could rope 250,000 new house buyers in the real estate market across the US. This will  lower refinancing costs for an estimated 800 thousand home buyers, Federal Government officials said. This is just a minute fraction of the  over  2.5 million homes that go to first-time home buyers a year in a healthy market, but it is for a segment of the population that requires this help. While housing usually leads the country out of recession, this time, it is an anchor, the hope is with rising employment, more buyers on the edge that could afford will be tempted to come back into the housing market.

     

    US Federal government Administration officials are not as down on the housing market as many media pundits say, they have some good facts to back them up their opinions too.,

    • In most markets home prices have risen 30 percent from their recession lows.
    • Of the roughly 13 million underwater homeowners, around 10 million have since come up from under water
    • More than 8 million homeowners have been able to refinance their mortgages, through the Obama’s (HAMP) or because of industry standards set by the program.
    • 3 million homeowners have been helped by the sister program of Home Affordable Refinance Program (HARP).

    FHA Loans for those with poor credit

    The mortgage borrower’s credit score is important in the actual amount of the down payment required for your FHA Mortgage. Typically, if your credit score is higher than 580, a borrower will only be required to put down 3.5 percent of the house price. If your credit score hovers between 500 and 580, the mortgage down payment requirement is increased to 10 percent, which can be hard for some borrowers. These are FHA guidelines that are strictly enforced by the FHA and might be increased depending on the lender that you decide to use. Lenders have their own system in how much they want as a down payment on a loan in order to decrease the risk of foreclosure.

    The president’s F.H.A. move is aimed at the key problem, first-time home buyers, s typically, such buyers account for 40 percent to 45 percent of home purchases.

     

                 Troubled Asset Relief Program: Help for Struggling Homeowners

    In March of 2010, President Obama released a series of programs known as the Troubled Asset Relief Program aimed at helping financially struggling homeowners.  In response to the nearly 25% of American homeowners who found themselves underwater, or what is termed as being “upside down” in their mortgages, the President’s plan lowers payments through refinancing and loan modification programs with new government-backed mortgages. The government is offering initiatives for loan providers and banks to write off some principal amounts due on loans for homeowners through these modification programs, rather than just lowering interest rates.  These plans are expected to help three to four million struggling property owners over the next few years.

    The government emphasized that no taxpayer money will be spent on these programs, and that the monies needed for the plan would be instead taken from $50 billion set aside for the Troubled Asset Relief Program.

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    Who qualify for FHA´s HECM reverse mortgages? 

    Homeowners over 62 years old with a low mortgage balance or who own the property outright and who live in the home. Successful applicants are required to receive consumer information (this service is provided for a small fee or free from a HECM counselor and prior to the loan) Whether you bought your home with an FHA-insured mortgage or not you may still apply for a HECM. The home you own has to be a single family home or a 2-4 unit home –one unit must be occupied by the borrower. Also eligible are HUD approved condominiums and manufactured homes meeting FHA standards.

    About repayment 

    A normal second mortgage or home equity loan is one where you would need adequate income in order to qualify because you have to make the monthly payments on the principle as well as on the interest. This is different from a reverse mortgage in which you don’t have to repay the loan until you no longer use the house as your primary residence or if you fail to meet the obligations of the mortgage. There are no monthly principal and interest payments, however, you have of course the responsibility of paying real estate taxes, utilities, and hazard and flood insurance premiums. When you sell the home or it is no longer used as a primary residence then you have to repay the cash, the interest, and other HECM finance charges. This is important for those borrowers who are concerned about leaving an estate to their heirs because any equity remaining after these payments are made can be transferred as an inheritance and no debt will be passed down to the heirs.

    Concerning The Amount That You Need To Borrow

    The amount you borrow from a reverse mortgage will depend on what you need the money for. Maybe you want more financial security, you have a sudden medical emergency or maybe you need to make some home improvements. Whatever the circumstances the HECM is a product that could work for you.

    Your age has a bearing on the amount you may borrow as does the current interest rate. Another consideration here is whichever is the lesser appraised value—the HECM FHA mortgage limit of $625,500 or the sales price. The Initial Mortgage Insurance Premium is a factor too.

    You can opt for HECM Standard or HECM SAVER. If you choose the HECM Standard you can borrow more capital. In fact the older you are and the lower the interest rate, the more you can borrow. Sometimes there is more than one borrower and if that is the case the amount you may borrow depends on the age of the younger of the borrowers. In order to get an estimate of the amount you could borrow you could go to the HECM Home Page and select a calculator. It is definitely better not to use a fee charging service to be referred to an FHA lender.

    The joint federal-state agreement is a mortgage settlement used by Barack Obama`s Financial Fraud Enforcement Task Force to wage war on financial crime and assist American homeowners. This task force is working hard across the federal executive branch with state and local partners to investigate and prosecute serious financial crimes and to ensure just and effective punishment for the perpetrators as well as to combat discrimination in the lending and financial markets and recover capital to help crime victims.

    In his State of the Union address president Obama spoke of a Blueprint for an America Built to Last and encouraged help for homeowners and their families. He called for relief measures to help servicemembers and veterans and made special mention of those wrongfully foreclosed upon or refused a lower mortgage interest rate. Also looked for were reduced fees for FHA borrowers who need to refinance. Additional help to support those communities hardest hit by the housing crisis even helping families avoid foreclosure were called for.

    Under the agreement between the Federal Government and the 49 state Attorneys General the main servicers are to provide help to thousands of servicemembers and veterans. They are to conduct a review of each servicemember who was foreclosed upon since 2006 and to compensate with a minimum of lost equity plus interest and $116,785 for those who were wrongly foreclosed upon. They must also refund those who were wrongfully denied lower interest rates. Servicemembers who were forced to sell their homes for less than the amount owing on the mortgage due to a Permanent Change in Station will be provided with financial relief. The servicers are obliged to pay $10 million into the Veterans Affairs fund which guarantees favorable terms for veterans as well as extending certain foreclosure protection to servicemembers serving in harm`s way under the Servicemember Civil Relief Act.

    Another aspect of the efforts on the part of the President to lower barriers and costs for refinancing is the announcement that the FHA will cut its fees for refinancing loans that are already insured by the FHA . The Department of Justice`s Civil Rights Division will oversee a review by servicers of sericemembers`s files back to 2006.Any violations of the Civil Relief Act will be compensated. Another review, this time going back to 2008, will check interest charged. Any interest over 6% will be compensated by at least four times the amount wrongly charged. In the case of those forced to sell their homes for less than the amount owed on the mortgage due to a PCS( permanent change in station) they may be compensated for the loss in their home`s value. The benefits of that program will include those servicemembers who bought their homes between July 2006 and December31,2008, or who received a PCS after October 1 2010. Any servicemember who is on active duty is protected from foreclosure unless the servicer procures a court order. Servicemembers stationed away from home who received Hostile Fire or Imminent Danger Pay within 9 months of the foreclosure are protected.

    The new settlement will help reduce the mortgage payments of homeowners.

    The $25 Billion mortgage settlement recently announced and filed in federal court in Washington D.C. is intended to help to relieve those in difficulties with their mortgages.

    The government is expected to monitor closely the banks involved to make sure that the money does in fact reach those borrowers for whom it is intended. The five banks; Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, and Ally Financial are to provide the money which is expected to be instrumental in making readjustments to help about a million house purchasers who are at the moment struggling financially due to the present situation with their mortgages.

    Banks were accused of misleading borrowers who were seeking modifications on their loans as well as of pursuing faulty foreclosures. They have not admitted to having done these things but have agreed to the settlement arranged by the government in order to “remediate” harms allegedly resulting from the alleged unlawful conduct.

    It is likely that in a hearing in which the settlement is to be approved by a judge, the Association of Mortgage Investors will request that the court limit the modifications for investor owned loans. This group feel that those who invested in mortgage-backed securities were not included in the settlement talks but might find that mortgage modifications have financially damaging results for them. The five banks according to the settlement, over a period 3 years, will reduce the amount of mortgage debts and restructure loans in difficulties. Designed to be of some help to about 1 million property owners who are struggling, this settlement has been seen as historical and is being enthusiastically promoted by the Obama administration.

    Also Federal and State governments will be receiving $5 billion of which $1.5 billion is to be used for those whose homes were lost due to foreclosure affording payments of $2,000. Officials of the Obama administration are optimistic about the measure and feel that it could be the start of the housing recovery that everyone is hoping for. An independent monitor will make sure that the new standards for processing mortgage payments are complied with. There will be a sampling process that is described as “very specific”, as well as test questions and error thresholds, the results of which will be reported on publicly. This will mean strong penalties if they don´t follow the directions on how the banks should behave.

    Although the details of the investigations into banking misdemeanors have not been revealed the settlement was filed as one lawsuit and five consent judgments with the banks. There is encouragement for most of the mortgage assistance to be implemented rapidly with a limit of 3.5 years. Relief will be provided to borrowers by cutting the debt. It is expected that banks bring the mortgage payments to 31% of income and with the value of the new loan not exceeding 120% the value of the property.

    The settlement documents also show that banks are to pay for the alleged defrauding of the government by lenders who sought federal mortgage insurance on risky loans. There were successful negotiations by Ally Financial and the Justice Department reducing the amount they have to pay to $110 million on the understanding that they give good terms when dealing with struggling borrowers in its portfolio. So hopefully the government will continue to strictly oversee the $25 Billion mortgage pact.

    The State of Vermont introduced a battery of rules and regulation changes to help streamline the financial industry and protect homeowners who are at risk of losing their homes. An important element in the protection of Vermont homeowners is the Vermont Mortgage Assistance Program.

    The Vermont Mortgage Assistance Program is managed by the Vermont Banking Division and is responsible for providing advice, information and assistance to residents who have been affected by the mortgage crisis and who are struggling to make mortgage payments. However, it is important to note the Mortgage Assistance Program does not have any actual funding to provide cash payments to borrowers. Nevertheless, the Mortgage Assistance Program can help by providing quality advice and by facilitating the communication between borrowers and lenders.

    According to the information provided at the Vermont’s Mortgage Assistance Program, the most important thing to know when you are facing mortgage issues is that time is of the essence. The sooner you deal with your delinquency problems the more options you have and the more likely you are of saving your home from foreclosure.

    A foreclosure will typically take six to nine months to complete. This is important because even if a lender is willing to try and negotiate a settlement, it is unlikely the lender will stop the process while the settlement is negotiated.

    The Vermont Mortgage Assistance Program also offers mediation services between lenders and borrowers. It also provides advice on how to arrange for loss mitigation with your lender. Loss mitigation is a negotiation between borrowers and lenders that studies the options a borrower has to restitute payments in arrears while reducing payments to a level that is affordable and realistic considering the financial situation of the borrower.

    If your borrower is not willing to negotiate a solution, the Vermont Mortgage Assistance Program can help you get in touch with local institutions that offer refinancing options to borrowers. A government program that offers refinance and mortgage modification options is HOPE, which may be a useful resource.

    Another point highlighted by Vermont’s Mortgage Assistance Program is the fact that in some cases losing your home is the best alternative. Trying to save your home at all casts may perpetuate a bad investment you can’t afford and are better off without. The program can suggest foreclosure alternatives that provide the least damaging alternatives for your credit rating.

    Contact the Vermont Mortgage Assistance Program by clicking here or calling (802)-828-568-4547.

    South Dakota Mortgage Help

    South Dakota Mortgage Help

    The loan assistance which the South Dakota Housing Development Authority provides is known as LAP which is The Loan Assistance Program. The idea is that down payment and closing costs when buying a home can be prohibitive. For this reason they are taken care of by the program as long as the first mortgage for the property is financed through a lender who is participating with the South Dakota Housing Development Authority (SDHDA). Because the LAP loan has a very low interest rate (5.0%) and the monthly payments are reasonable, it makes owning your home a real possibility. The maximum loan available is $5,000 over a period of five years. SDHDA provide the assistance loan on condition that your take Homebuyer Education classes with an approved center to ensure that you really understand all the steps you are required to take when buying property. The actual monthly payments you make for your LAP loan will be included in your regular mortgage repayments each month. In effect the LAP loan is a second mortgage as is EMAP which is the Employer Mortgage Assistance Program. However with EMAP the amount you may borrow is a minimum of $600 up to the maximum of $6,000 over a period of 5 years and the interest rate is 2% only. To apply for this type of loan you will need to contact a participating lender and have an eligibility certificate which you can get from your employer, who must be a participating employer. As is the case with the LAP loan the EMAP loan is repaid together with the first mortgage loan and you can have it paid automatically from your bank account to the lender each month if you wish. If you obtain an EMAP loan with the cooperation of your employer but before the end of the 5 years period you change employment and therefore no longer work for the same boss your interest rate will be changed from the 2% to the prime rate plus 5%. This arrangement is provided for in the “Addendum to the Promissory Note” which you sign when you close the loan. Your participating lender might have other important details which you will need to take into consideration when you take out the loan. With the Down payment Assistance Loan there is not a prepayment penalty to worry about. If you sell your home you are required to settle the amount of the Down Payment Assistance Loan. SDHDA will inform the person who closes the sale of the amount to be paid so that the loan can be paid off. In this way SDHDA is able to assist many people to purchase their own home. The Homebuyer Education classes are very important in helping you to know what to expect and how to go about your property purchase in the best way. Please take advantage of these provisions.

    Applying for a mortgage can be a daunting exercise, especially if you have made financial mistakes in the past and feel that your credit score may interfere with your loan application. This also applies to government subsidized loans through agencies such as the Federal Housing Administration which offers low-cost mortgages to medium- to low-income families. However, if you feel your credit rating will get in the way of your home purchasing dreams, take heart, this is not necessarily the case. Although your credit score is a significant factor when applying for an FHA loan, it is not the only factor. The FHA lending and underwriting rules allow for flexibility with reliable lenders which may have had some credit hiccups in the past.

    So what are the FHA rules on lending? This article provides a brief overview on what the FHA looks at when assessing a loan.

    There are four factors that determine the eligibility of a borrower to a loan: credit history, steady employment, debt-to-income ratio and your payment history in the last 12 to 24 months. This means that if your credit score is low because of a financial problem or mistake you made several years ago, but you score well in the other areas, you may still qualify for an FHA loan. Nevertheless, what constitutes a good or acceptable credit score for the FHA? This depends on the loan, but the FHA does have a general standard for most of its loans.

    The FHA and Credit Scores

    The FHA applies a sliding scale rule on loans depending on the credit score of the borrower. Borrowers with a higher credit score can apply for a higher loan to value percentage of the purchasing price of a property. For example, credit scores between 500 and 579, which would be considered very low by commercial lenders without the insurance of the FHA, can qualify for a maximum of 90 percent of the loan to value rate of the property. If your credit score is higher than 580, you may be eligible for the maximum FHA loan financing, as long as the other areas are also satisfied. If your credit score is below 500, you are not eligible for an FHA loan.

    Therefore, the answer to the initial question of this article, the minimum credit score to be even considered for an FHA loan is 500. Anything less and your application will not even be considered. However, even applicants with credit scores as low as 500 to 600 can qualify for loans as long as the other elements the FHA looks into are above board.

     

    In the current economy, few of us have the savings or income to finance the purchase of a brand new home. Even second hand homes in prime condition can be out of the reach of the average household. So what can you do if you need a new home or you are a first-time buyers looking to buy yourself a slice of the American dream? A good option for many, especially those not scared to invest some sweat and elbow grease in their home, is investing in a fixer upper and doing or at least supervising the work required to make the home livable again.

    Rehab Loans with FHA

    If that is your plan, you can get government mortgage assistance from the Federal Housing Administration. The FHA has a specific product for buyers interested in saving money and investing money and hard work in a fixer upper home. If you know where to look (think foreclosures, auctions, repossessions…) you can buy homes that have fallen into disrepair and need some heavy doses of tender loving care at bargain prices. Remember banks, which more often than not end up with dilapidated homes, are not in the real estate industry; they are in the lending business. So, they are often very happy to unload properties in need of renovation.

    The loan you may be looking for is the FHA’s 203(k) Fixer Upper Loan. This product is based on the Housing and Urban Development’s, HUD, 203(k) program and allows buyers invest in fixer-uppers with a FHA guaranteed loan. The best things about this loan is that it is especially designed for fixer-uppers and comes with an inbuilt protection for borrowers if the repair work costs more than they expected. And let’s face it, it is next to impossible to estimate accurately how much a fixer-upper will cost to get back into shape until you actually get started.

    How Do You Apply?

    As usual, the FHA does not provide loans directly to borrowers, but uses lending partners. Approach a selection of lenders and request information on their 203(k) fixer-upper loans. The application process is similar to a normal FHA loan. The lender will go through the regular credit checks and debt-to-income analysis. In addition to the basic paperwork requirements of an FHA mortgage, you will need to provide a detailed list of the repairs the property requires and the estimated cost of those repairs.

     

    The real estate collapse of the last three years has caused the federal government to come up with regulations designed to avoid this from happening again. Mortgage regulation rules are being presented under the Dodd-Frank Act of 2010. The Dodd-Frank Act is part of the far-reaching financial regulatory reform that sets out to promote financial stability and improve the accountability and transparency of the financial system as a whole. This was a reaction to the list of bail-outs of companies that were “too big to fail” and required on-going hand-outs from taxpayers to stay in business.

    One of the changes proposed under this Act is to force mortgage lenders to take 5 percent of the credit risk of mortgages pooled in securities if the mortgages do not meet certain requirements. These are mortgages that are put together as an investment unit and which can be bought or sold in a similar way to stocks in a company. One of these requirements, which is making mortgage lenders unhappy, is that borrowers must pay at least 20 percent of the home’s purchase price as down payment. The idea behind this rule is to stop borrowers from buying homes they can’t afford just because loans are available. According to some analysts, cheap and available loans were one of the reasons house prices increased artificially and later crashed when the market came to its senses and corrected itself. Canada has a similar down payment requirement as part of their comparatively stricter financial regulatory system, which may have had a lot to do with why Canada was not affected as seriously by the real estate driven recession of 2009.

    Critics of the 20 percent down payment rule claim this will price out many borrowers who can’t afford to come up with 20 percent of a home’s purchase price. Figures from 2010, seem to support this claim. Around 39 percent of home buyers in 2010 put a down payment of less than 20 percent, according to a poll by CoreLogic. The question, of course, is if the low down payments are because people can’t afford to pay 20 percent or because they are not required to do so? Additionally, even if many buyers can’t afford the 20 percent rule, is that necessarily a problem? Could it be argued that buyers who can’t afford to pay 20 percent of their mortgage are simply not in a position to buy and should focus their efforts on saving for a down payment? Of course, the real estate mortgage industry claims it is time for the government to stimulate the mortgage industry not weigh it down with restricting regulations. How do you feel? Is this regulation a much needed protection against another crash, or is it an example of federal government choking the growth the real estate industry so desperately needs?

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