The Federal Housing Administration and the Mortgage Market

A 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster.

Disaster Relief

In addition to the 203(h) program (mortgage insurance for homeowners in presidentially designated disaster areas who require major repair or replacement of a damaged home), the FHA has placed a 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster. Loan servicers are required to work with the homeowner on payments, including waiving late charges; lenders are also required to release homeowner insurance proceeds to the borrower

Disaster Relief

Allows the borrower to incorporate the cost of adding energy efficient features to new or existing houses in combination with a 203(b) or 203(k) loan, or for 203(h) in connection with a disaster.

Energy Efficient Mortgage

Allows the borrower to incorporate the cost of adding energy-efficient features in combination with an FHA-insured mortgage

Energy Efficient Mortgage

Match each description with the name of the FHA loan program that applies. Purchase of a manufactured house on a developed lot, development of a lot for a manufactured home, or a combination of the two

FHA loan program Title I, Manufactured Housing

Match each description with the name of the FHA loan program that applies. Moderate rehabilitation of properties, such as alterations, repairs, and site improvements on single-family homes

FHA loan program Title I, Property Improvements

Match each description with the name of the FHA loan program that applies. Reconstruction in a disaster zone

FHA loan program Title II, Section 203(h)

Match each description with the name of the FHA loan program that applies. Purchase of a single condominium unit

FHA loan program Title II, Section 234(c)

Match each description with the name of the FHA loan program that applies. Purchase of one- to four-family homes

FHA loan program itle II, Section 203(b)

Purchase or rehab of a home in an older, declining urban area

FHA loan program Title II, Section 223(e)

While you don't need to commit all of these programs titles to memory, it's worthwhile to know what types of loan programs are available for borrowers with different needs.

FHA loan programs

The lender can require homeowners applying for a HECM to buy additional loan insurance

False

The mortgage insurance premium is a fee that lenders pay to participate in the direct endorsement program.

False

Law enforcement, teachers, firefighters, and EMTs get a 50% discount on certain foreclosed FHA-insured properties

Good Neighbor Next Door

This program provides law enforcement officers, K-12 teachers, firefighters, and EMTs a deal on purchasing foreclosed FHA insured properties in revitalization areas. Eligible buyers receive a 50% discount off list price with a down payment of only $100, provided the buyer lives in the property for three years.

Good Neighbor Next Door

The FHA loan program is designed for borrowers who ______.

Have a minimal down payment and less-than stellar credit

Insurance of a reverse mortgage for homeowners age 62 and older who want to borrow against their home equity as a lump sum or on a monthly basis (for life or a specified term).

Home Equity Conversion Mortgage

Which loan program is only available to homeowners who are 62 or older?

Home Equity Conversion Mortgage

Allows participants to use Housing Choice Voucher funds, which are normally used to pay rent, to help pay monthly homeownership expenses. Applicants must be first-time homeowners, have at least one employed family member, and meet minimum income requirements.

Homeownership Voucher Assistance

Which of these programs is aimed at first-time homebuyers?

Homeownership Voucher Assistance

What's a key feature of the Federal Housing Administration's loan program?

Insures lenders against loss from borrower default

The FHA loan program insures lenders against loss from borrower default.

It funds this program through mortgage insurance premiums paid by borrowers.

The Rodriguez Family As a mortgage broker, Mike is very familiar with the ways that the FHA has influenced the mortgage market. Here's one example: The Rodriguez family obtained their three-bedroom home with an FHA loan 10 years ago, which they will have paid off in another 20 years. Which FHA benefit applies here?

Long-term amortized loan

Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs.

Native Americans living on tribal land

The Section 248 and Section 184 programs both guarantee loans to

Native Americans to purchase, build, or rehabilitate homes on federal trust land.

FHA guarantees mortgage loans for Native Americans under its Section 248 program. The loans guaranteed under the program are used to construct, acquire, refinance, or rehabilitate single family housing located on trust land or land located in an Indian or Native Alaskan area. HUD's Section 184 program is insurance for loans made to Native Americans to purchase, build, or rehabilitate property located on or off tribal lands. Section 184 loans can also be used to refinance. These loans are fundamentally the same as regular Section 203(b) loans, except that they are only available to Native Americans, primarily on Indian land. They also require an agreement with the tribal council in charge of the land where the property is located

Programs for Native Americans

Mortgage insurance for Native Americans to construct, acquire, refinance, or rehabilitate single-family housing located on tribal land

Programs for Native Americans

Section 255 of the Title II FHA-insured loan program covers ______ mortgages for borrowers age 62 or older.

Reverse

Monty has certain goals in life, and most of those goals revolve around making money. He loves following the market and deciding where to invest his money. What is available to people like Monty as a result of stability in the mortgage industry created by the FHA?

Stabilizing the mortgage market led to a global investment market in mortgage-backed securities.

The FHA helped the mortgage market by

Standardizing borrower qualifications Establishing the long-term amortized loan Improving construction standards Requiring appraiser certification Opening up the global market for mortgage-backed securities

Does the FHA ever get involved in home improvement loans?

Sure. There are programs for everything

The Chens are an older couple who want to retire near the beach. Even though the home they want to buy is smaller than their current house, its location makes it cost quite a bit more. They're glad when the home's appraisal comes in a little bit higher than the sale price, as it increases their confidence in their investment.

The Chens can have confidence in the appraisal, and therefore their purchase, because of appraiser licensing standards instituted by the FHA.

Danica graduated from college last year, landed herself a great job, and now she's ready to buy a condo in a great complex. She just hopes that her student loan won't get in the way of a mortgage approval from her lender. Which FHA strategy for mortgage market stabilization may impact Danica's purchase?

The borrower qualifying standards that FHA-approved lenders must follow help to prevent default on mortgages. Luckily, Danica's job, her excellent credit history, and a little help from her parents on the down payment helped her to meet her lender's underwriting guidelines

Standard You've reviewed this Joe loves working outside and is glad to put his skills to use building homes. He can point to houses all over town that he helped build. He feels good knowing that he's been a part of providing safe, healthy homes for the community where he lives, and that they are quality structures that will shelter people for many years to come.

The construction standards required by the FHA not only create employment in the construction industry for people like Joe, they ensure that homes purchased under the FHA loan program are safe and healthy for residents.

The FHA has helped to significantly improve the mortgage market through ______.

The introduction of the long-term amortized loan

The FHA collects an insurance premium from the loan.

The premium is calculated as a percentage of the loan amount.

Nadia is purchasing a unit in a cooperative housing project. Lori and her husband want to purchase a duplex. Sydney has contracted for repairs on her home, which was damaged in flooding that was declared a federal disaster.

Title 2

Each of the individuals in the following scenarios will need an FHA-insured loan. Identify which scenario will use the FHA Title I and which will use the Title II loan program. Hank is purchasing a manufactured home, along with a lot to place it on. Rose needs to fix the roof and replace some windows and doors in her home.

Title I

This title covers loan insurance for moderate rehabilitation of properties and for the purchase of manufactured homes

Title I

Loans on single-family homes may be used for alterations, repairs, and site improvements (includes construction of non- residential buildings, such as garages). Loans on multi-family properties may only be used for alterations or repairs. Loan amounts and terms vary by type of property.

Title I, Property Improvements

The loan may be used to purchase a manufactured house on a developed lot, to develop a lot for a manufactured home, or a combination of the two. Loan limits vary by year, and may vary by location for high-value areas. Example limits are $69,678 for the home, $23,226 for the lot, and $92,904 for both. Current limits may be found on HUD's website. Note: If the loan required is higher than these limits, some another title of funds may be available.

Title I, Purchase of Manufactured Housing

This title covers loan insurance for many properties and situations.

Title II

Beverly has applied for a loan to purchase a Craftsman-style home for herself and her teenage son. Her mortgage broker helps her find an FHA loan program that accommodates her low down payment. Which program will serve Beverly's needs?

Title II, Section 203(b)

FHA loan insurance helps lenders make riskier loans without assuming more risk.

True

Homeowners must maintain homeowners insurance, or risk defaulting on their reverse mortgage.

True

The FHA is a federal agency.

True

The FHA mortgage insurance program helps to stabilize the mortgage market.

True

The lender is required to counsel Michelle and Ray about the possibility that there will be no equity left in the home by the time the reverse mortgage ends.

True

Nicholas has some credit issues, though he has a good job.

Will benefit from the FHA loan program

Benefits of the HECM Michelle and her husband, Ray, are both in their 70s. With no children, they have no one to leave money to when they shuffle off this mortal coil. They're also on a fixed income. They do have full ownership of their home, however, so they decide to apply for the HECM reverse mortgage. If you were describing the benefits of this program, could you help them separate fact from fiction?

You won't need to meet income requirements to qualify for the loan. FHA will cover any negative balance after the sale of the home. You'll receive their payments as long as one of them remains in the home. There are no repayment requirements until you both no longer live in the home. There are limits on the amount of origination fees that can be charged for them to obtain the loan.

In a reverse mortgage, the lender makes payments to the homeowner, who continues to live in the home. Repayment of the loan isn't required until the borrower dies or otherwise leaves the home,

allowing the lender to sell the home to redeem the money paid out.

Reverse mortgages have become popular over the years, and will likely remain so as

baby boomers age into senior homeowners

FHA special programs target specific groups, such as senior homeowners with home equity

but limited cash.

FHA Special Programs Come With Caveats Not every senior will qualify for the HECM, very few Good Neighbor deals are usually available, and a loan is a loan, whether the FHA insures it or not. FHA special programs are designed to increase options for homeownership and for improving the safety of homes, _________________ and each borrower must repay the loan according to its terms.

but they are not grant programs,

A reverse mortgage is a way of using the equity in a home

by borrowing against it.

The direct endorsement program allows lenders to

directly qualify borrowers using FHA guidelines.

FHA-approved lenders can work within the direct _________________ where the lender is responsible for approving borrowers according to FHA requirements.

endorsement program

The long-term amortized loan

gave many more Americans the opportunity to become homeowners.

Special programs exist through the FHA for financing energy efficiency improvements

in conjunction with an FHA-insured mortgage.

The voucher assistance program could help eligible homeowners

keep their home during a financially difficult period.

Borrowers apply to the lender,

not directly to the FHA.

The Home Equity Conversion Mortgage (HECM), insured by the FHA, is the most popular form of __________________ available for seniors.

reverse mortgage

The FHA was created in 1934 to stabilize the mortgage market by

standardizing credit and construction standards.

HUD and the FHA offer specific mortgage programs

to support disaster relief and reverse mortgages, as well as home purchases for good neighbors (law enforcement, firefighters, and teachers), recipients of housing vouchers, and Native Americans.

FHA offers numerous loan programs to meet

varying needs of borrowers.

Sometimes the FHA will announce special short-term modifications that are aimed at helping _______________. And of course, there's the 203(h) loan

victims of disasters